The impact of slow privatisation in the beverage and textile industry in Eritrea

Abstract

In many developing countries the privatisation of state owned enterprises is receiving increased attention but the selling of the enterprises is difficult. In Eritrea state owned enterprises were offered for sale at the end of 1996, but many of the relatively large companies are not privatised yet. This created the possibility to study the impact of slow privatisation in a developing country. After the privatisation announcement the state owned enterprises in both the profitable beverage industry as well as in the unprofitable textile industry showed negative effects on profitability. Moreover, managers in both industries complained about slow privatisation, but the complaints were different. In the profitable beverage industry privatisation frustrated the orientation on the future because the privatisation authorities restricted investments. The managers of the loss making textile industry were more involved with survival and they complained about the long duration of privatisation that made it impossible to get outside financing quickly.