Back to the Future for African Infrastructure? Why State-Ownership Is No More Promising the Second Time Around

Too many African state-owned enterprises (SOEs), particularly those in infrastructure sectors, have a long history of poor performance. African governments and donors labored through the 1970s and 1980s to improve SOE performance through “commercialization”——i.e., methods short of ownership change. These generally failed, giving rise, in the 1990s, to much more heavy reliance on private sector participation and ownership. This approach produced some successes, but Africa’s private participation in infrastructure (PPI) initiatives have been comparatively few and weak. A number of those that have been launched have run into problems, to the point where both investor and African government interest in the approach has waned in the last few years. The reform is not popular—surveys of public opinion in 15 African countries reveal that only a third of respondents prefer private to state-owned firms. Nonetheless, African states (and their supporters) should not jettison the PPI approach. Rather, they should acknowledge its limitations, and recognize the large scope and moderate pace of the preparatory measures required both to improve their investment climates and to make PPI work effectively.privatization, private sector, African state-owned enterprise, commercialization, private participation in infrastructure

Privatising Basic Utilities in Africa: a Rejoinder

.Poverty, MDG, Africa

The Evolution of Enterprise Reform in Africa: From State-owned Enterprises to Private Participation in Infrastructure — and Back?

Many African state-owned enterprises (SOEs), particularly those in infrastructure, have a long history of poor performance. From the outset, SOE financial and economic performance generally failed to meet the expectations of their creators and funders. By the late 1970s, the situation was alarming, and by early 1980s, critical. The poor financial performance of SOEs became so burdensome to government budgets that it attracted the attention of the international financial institutions, or IFIs. In response, in the 1980s, the World Bank approved SOE reforms that could be summed up in the term “commercialization”. By the mid-1990s, however, the idea of making SOEs function efficiently and effectively under government management was largely abandoned by the IFIs and privatization and private participation in infrastructure, or PPI became the order of the day. Once more, however, the results were disappointing. PPI has not been as widely adopted as anticipated, nor has it generated the massive resources and changes hoped for, nor has it been widely accepted as beneficial by the African public. The findings of recent studies in Africa suggest that PPI should not be jettisoned, and that the more productive path is to recognize the limitations of the approach, and to work harder at creating the conditions needed to make it function effectively. This will entail, as many have recognized, an end to the view that public and private infrastructure provision is a dichotomy – a case of either-or, one or the other – and a better appreciation of the extent to which the performance of each is dependent on the competence of the other. In other words, for the private sector to perform well, public sector capacity must be enhanced. Moreover, proposed tactics of reform should fit more closely with the expectations and sentiments of the affected government, consumer base, and general population. This broader approach implies, probably, a reduction in the scope and, certainly, a reduction in the planned speed of operations. Improving infrastructure performance is a long-term matter.Africa, Enterprise reform, State-owned enterprises, Privatization

Public enterprise reform in adjustment lending

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.Banks&Banking Reform,Enterprise Development&Reform,Country Strategy&Performance,Municipal Financial Management,General Technology

Privatization: A Summary Assessment

In the last 25 years many thousands of formerly state-owned and operated firms have been privatized in developing and transition countries, generating over $400 billion (US) in sales proceeds. In addition, thousands of firms have been transferred by privatization processes in which no money was raised (though a surprising number of state-owned firms remain in these regions). The vast majority of economic studies praise privatization’s positive impact at the level of the firm, as well as its positive macroeconomic and welfare contributions. Moreover, contrary to popular conception, privatization has not contributed to maldistribution of income or increased poverty——at least in the best-studied Latin American cases. In sum, the technical picture is generally positive. Nonetheless, public opinion in the less developed world is generally suspicious of, and often hostile to, privatization. A good part of the problem is that privatization has proven harder to launch, and is more likely to produce errant results, in low-income, institutionally weak states, particularly in the most important infrastructure sectors. Privatization is hard to sell politically; it has become a lightning rod and handy scapegoat for all discontent related to liberalization and globalization. What is needed are reform mechanisms that give incentives and comfort to reputable private investors, that create and sustain the policy and regulatory institutions that make governments competent and honest partners with the private operators, while at the same time protecting consumers, particularly the most disadvantaged, from abuse.privatization, weak institutions, poverty, liberalization, globalization, incentives

Civil service reform and the World Bank

The emphasis placed by the World Bank in recent years on the major overhaul of developing country economies has accentuated the importance of adequate public sector administrative capacity, especially within the central core of government, that is, the civil service. This paper surveys recent Bank experience in civil service reform, and begins to assess the progress made. The paper focuses on two separate but related aspects of civil service reform work. One deals with the shorter term, emergency steps to reform public pay and employment policies. These reforms usually focus on measures to contain the cost and size of the civil service, mostly in the context of structural adjustment lending. The other set of reforms are those dealing with longer range civil service strengthening efforts, some of which may support various nearer term cost containment measures, but most of which are directed toward ongoing, sustained management improvements. Many of these reforms have been included in technical assistance projects, either those that stand alone as"development management"operations or those that constitute direct institutional support for specific actions taken in SALs.Banks&Banking Reform,Municipal Financial Management,Health Monitoring&Evaluation,Labor Management and Relations,National Governance

Privatization in competitive sectors : the record to date

The paper reviews recent evidence on the impact of privatization. It focuses on traditional privatization efforts involving firms in competitive markets. It shows that privatization improves firms'financial and operating performance, yields positive fiscal and macroeconomic benefits (proceeds are saved rather than spent, transfers decline, and governments start collecting taxes from privatized firms), and improves overall welfare. The popular view that privatization always leads to layoffs is unfounded. While highly protected firms have seen significant declines in net employment, competitive firms generally experienced slight declines if any. Privatization's effects on wealth and income distribution have only recently been receiving the attention of analysts, and research is just getting underway. The paper highlights the conditions for successful privatization: strong political commitment combined with wider public understanding of and support for the process; creation of competitive markets through removal of entry and exit barriers, financial sector reforms that create commercially oriented banking systems, effective regulatory frameworks that reinforce the benefits of private ownership; transparency in the privatization process; and measures to mitigate adverse social and environmental effects.Banks&Banking Reform,Non Bank Financial Institutions,Municipal Financial Management,Financial Crisis Management&Restructuring,Trade Finance and Investment,Municipal Financial Management,Financial Crisis Management&Restructuring,Non Bank Financial Institutions,Economic Systems,Banks&Banking Reform

“The Price You Pay”: The Impact of State-Funded Secondary School Performance on Residential Property Values in England

This paper examines the relationship between state-funded secondary school performance and local residential property values in seven major English cities. When choosing which secondary school they wish their children to attend, parents will be aware of the school’s performance in Key Stage 3, GCSE and A- level examinations. We suggest that GCSE examination results will be the measure of school performance that parental choice will be most closely correlated with. Therefore, secondary schools with good GCSE examination results will be “oversubscribed” in that more students will wish to attend these schools than there are places available. Schools will then have to develop mechanisms for rationing the available places - central to rationing strategies in English schools at the moment is geographical proximity of the family home to the school of choice. Parents will thus have a strong incentive to purchase houses in the “catchment” area of high performing schools. Our results suggest that this is the case, with high performing schools stimulating a price premium in local residential property markets of between 1% and 3% for each additional 10% point improvement in the pass rate in GCSE examinations.Hedonic, Capitalisation of school performance, Property prices

The International Experience with Privatization: Its Rapid Rise, Partial Fall and Uncertain Future

From a triumphant high in the late 20th century, esteem for privatization has significantly declined, post-2000. Politicians and businesspeople alike now take a more balanced view of its effectiveness, recognizing that privatization must happen in a supportive institutional and policy framework if it is to live up to its potential. They have also come to share a better understanding of the sociopolitical consequences – especially with regard to public opinion – that privatization inevitably brings with it. This paper provides a comprehensive examination of this 21st century global shift in perception, with an emphasis on developing and emerging markets. Through a rich trove of case studies, it accounts for why privatization has slowed, analyzing current and past trends from a variety of sectors worldwide. It also offers a thorough analysis of privatization’s effects on economies, societies and the political process, while giving ample space to critics’ views. Although powerbrokers now tend to view privatization warily, there is good reason to believe that, due to the impact of the ongoing global economic crisis on government budgets, its day will come again. This paper, with its impressively detailed and wide-ranging grasp of the phenomenon, is essential reading for academics, policymakers and economists –the individuals who must grapple with privatization’s implications when that day arrives

A Dynamic Analysis of Mortgage Arrears in the UK Housing Market

The UK economy has enjoyed an unprecedented period of positive economic growth since the early 1990s. The absence of recession for more than a decade has been accompanied by a sustained decline in the level of mortgage arrears, as reported by major lenders. This paper seeks to examine the factors which have driven the reduction in mortgage arrears and, in doing so, identify those factors which are most likely to cause arrears to increase in the future, should economic conditions deteriorate. The paper employs the Johansen methodology to test for the presence of multiple cointegrating vectors. An error correction model is estimated in order to examine long-run and short-run dynamics in mortgage arrears. In line with previous research concerning the causes of mortgage arrears, the results presented here emphasise the importance of changes in the rate of unemployment, loan–income and debt–service ratios. More importantly, our results highlight the statistical significance of unwithdrawn housing equity as an explanatory variable with respect to mortgage arrears.mortgage arrears, housing market, cointegration