Public Enterprise Reform

This book explores the complex question, "Is privatisation a good public policy?"

This book tries to systematize the lessons learned in the past two decades of public enterprise reform to correct the perceived deficiencies of state-enterprise sectors in Africa, Asia, and Latin America. It addresses the macroeconomic adjustments typically required in the effort to fashion a more open and competitive economy - liberalizing trade and ending preferential treatment for state enterprises; shifts toward market-oriented financing in the banking system; moves toward market pricing and reforming the institutional structure for setting tariffs; and establishing more competitive and evenhanded compensation and staffing policies in state enterprises. It argues that with macroeconomic reforms under way, government needs to ground its reform of state enterprises in an assessment of the purposes to be served by its state-owned sector. It describes how reforming the relationship between government and its enterprises entails striking a delicate balance between autonomy and accountability. The report examines the mechanisms used by governments in a variety of developing countries to set goals for state-owned firms and to evaluate their performance. It addresses the promise and the risks of privatization, whether through outright sales, management contracting, leasing, franchising, contracting-out, or encouraging new entrants into the private sector. It also offers an overview of the task facing governments with a failing public enterprise sector.

Public enterprises reforms occupy the central place in the schemes of economic reforms in India. In many developing countries opting for economic reforms, public enterprise reforms have come at the beginning of the cycle of economic reforms. In India, it has not happened so and the results are there for us to see. The present book makes an attempt to present a case for reforming public enterprises in India and also the agenda for action for this purposes. It outlines the challenges ahead for public enterprises and the need for reforms viewed from the global perspective. It outlines the performance of the public enterprises and the areas requiring the attention of the reformers. It presents the case of a state in which reforms have to be carried out and the context for such reforms. It identifies regulations as one of the key component of the reforms. The book also elucidates the reform experience of some of the states. It presents a balanced view of the theory and practice of public enterprise management in the reform context. It incorporates case studies of nine public enterprises to demonstrate the need and effect of economic reforms.

Public enterprise reform is more successful in countries whose financial systems are relatively well developed. Countries seeking to implement broad public enterprise reforms achieve greater success if they also implement substantial and well- designed financial reforms.

Specific divestiture dates and institutional public enterprise reform should probably not be a matter of hard conditionality for sectoral adjustment lending. One alternative is to establish institutional development projects that parallel adjustment operations. Another is to establish "primary conditions, " nonfulfillment of which would bring an operation to a halt, and "secondary conditions, " (including most institutional and public enterprise reforms), nonfulfillment of which would evoke sanctions but not end operations.

In many parts of the world public enterprise is in crisis. Privatisation programmes are being widely touted as the solution to many of the problems of inefficiency and slow rates of growth associated with public enterprise. This book discusses the underlying causes of those problems, and critically examines some of the solutions that have been adopted. Its geographical coverage is wide and it cuts across the political spectrum. The experiences of countries in four continents are analysed in an attempt to shed light on current dilemmas. Recurrent patterns are found; problems are frequently seen to be political as much as economic, and bureaucracy and administrative confusion is often found to be at the heart of poor financial performance.Yet since political aims, economic environment, and administrative and managerial capabilities vary so widely, universal solutions remain more difficult to define than universal problems.