How do economies in transition handle privatization

See Amin and Webster, This reasoning is similar to that found in Sachs and Woo , pp. With its regulated prices and minimal privatization of medium and large firms, Belarus is an anomaly both in terms of policy and outcomes so far.

The fact remains that at the moment the unemployment rate in Belarus is lower and the wage arrears much less than in Russia or Ukraine. See p. This phrase and notion, and many of the ideas in the following paragraphs, were provided by Itzhak Goldberg, of the World Bank, in several written communications in December and January See Frydman and others See also Aghion and Blanchard , p.

See World Bank , which presents the evidence for these points in the Introduction and in Chapters 1 and 3. The most tightly reasoned argument along these lines is found in the writings of three economists deeply involved in the Russian privatization program: Maxim Boycko, Andrei Shleifer, and Robert Vishny. See in particular Boycko, Shleifer, and Vishny Alexieva , N. Nellis , T. Anderson , James , H. Agency for International Development. Dowlah , C. Frydman , Roman , Cheryl W.

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Layard, and L. Reform in Eastern Europe. Google Scholar. Blasi, J. Kroumova, and D. Kremlin capitalism: Privatizing the Russian economy. Ithaca: Cornell University Press. Bortolotti, B. Reluctant privatization. Working paper no. Boycko, M. Shleifer, and R. Privatizing Russia. Canning, A.

In Estrin Coffee, J. Institutional investors in transitional economies: Lessons from the Czech experience. In Corporate governance in Central Europe and Russia , ed. Frydman, C. Gray, and A. Rapaczynski, vol. Budapest: Central European University Press. Djankov, S. Enterprise restructuring in transition: A qualitative survey. Journal of Economic Literature — Earle, J.

Estrin, and L. Ownership structures, patterns of control and enterprise behaviour in Russia. In Enterprise restructuring and economic policy in Russia , ed. Commander, Q. Fan, and M. Various years. EBRD transition report. London: EBRD.

Estrin, S. However, the former was very limited, with the government selling only minority equity stakes until , and without transferring management control. Political uncertainty prevented the emergence of a coherent privatization policy. In addition, the process of privatization was viewed as poor, with the secondary offering subscribed only 1.

Overall, as we report below, the studies on developing economies show that a move from state to private ownership alone does not automatically yield economic gains. Rather, a number of factors have been found to influence the success of privatization, namely: Which firms are privatized; there can be a positive or negative selection effect. Whether privatization is total or partial; evidence suggests that the former is more beneficial. The regulatory framework, which in turn depends on the institutional and political environment.

Effective competition. This has been found to be critical in bringing about improvements in company performance because it is associated with lower costs, lower prices, and higher operating efficiency. We also provide an analysis of the robustness of the evidence in the literature about the impact of privatization.

As Megginson and Sutter note, researchers face numerous methodological problems when they analyze the economic effects of privatization. Other problems arise when using accounting data: the determination of the correct measure of operating performance, the selection of an appropriate benchmark and statistical tests are important challenges. These issues are germane to the interpretation of the results of the studies surveyed below.

We distinguish between two different empirical approaches. The first consists of comparing the performance of government-owned firms to that of privately-owned firms. The second approach consists of comparing pre-and post-divestment performance for companies privatized via share issues public offerings; Megginson, Nash, and van Randenborgh methodology.

An obvious way to examine the impact of privatization is to compare the performance of government-owned to privately-owned firms.

Studies in this tradition compare post-privatization performance changes with either a comparison group of non-privatized firms or with a counterfactual. However, important methodological issues arise, especially in the earlier studies. First, it is difficult to determine the appropriate set of comparison firms, especially in developing countries where the private sector is limited.

Second, selection effects and endogeneity may bias the comparison, as factors determining whether the firm is publicly or privately owned are also likely to affect performance Gupta, Ham, and Svejnar One of the first studies to compare SOE and private firm performance is that of Ehrlich et al.

These authors find a significant association between ownership and firm-specific rates of productivity growth. Interestingly, the empirics also suggest that the benefits derive primarily from complete privatization of the firm, and that a partial change from state to private ownership has little effect on long-run productivity growth. Other studies have employed a similar approach examining differences in efficiency between private and government-owned firms within a specific country, such as Majumdar for Indian firms and Tian with Chinese firms.

These authors both find that private-sector firms are more efficient. However, these results are not highly robust from the perspective of contemporary methods, as they do not directly address selection issues.

Concerning studies using a counterfactual approach, one can cite the influential study by Galal et al. These authors compare the actual post-privatization performance of twelve large firms in the airlines and utilities industry in Britain, Chile, Malaysia, and Mexico to a counterfactual performance. La Porta and Lopez-de-Silanes study privatization in Mexico and find that privatized Mexican SOEs rapidly close a large performance gap with industry-matched private firms that had existed prior to divestment.

Another approach has been to exploit a multi-industry, multi-national cross-sectional time series to analyze the effects of government ownership on efficiency. The advantage of this method is that it captures differences that are not apparent in single-country or single-industry series, and the results are therefore methodologically more soundly based. In their seminal work, Boardman and Vining use measures of X-efficiency and profitability ratios of the largest non-U. Privately-owned firms are found to be significantly more profitable and productive than state-owned and mixed ownership enterprises, but mixed enterprises are no more profitable than SOEs.

Another important study is that of Frydman et al. To control for the possibility that better firms are selected for privatization, these authors compare the pre-privatization performance of managerially-controlled firms with those controlled by other owners.

Frydman et al. As noted, governments sequence privatizations strategically, often leading the most profitable firms to be privatized first Gupta, Ham, and Svejnar ; Dinc and Gupta To control for selection and endogeneity biases, the latest studies have employed more advanced econometric techniques including differences in difference, triple differences matching methods, and instrumental variable methods. For instance, Dinc and Gupta examine the influence of political and financial factors on the decision to privatize government-owned firms in India using data from the — period.

They find that profitable firms and firms with a lower wage bill are likely to be privatized early and that the government delays privatization in regions where the governing party faces more competition from opposition parties. This raises an identification issue for evaluating the effect of privatization on firm performance: if more profitable firms are more likely to be privatized, we may overstate the impact of privatization on profitability when we compare the performance of government-owned to that of privatized firms.

The authors then proceed to use political variables as instruments for the privatization decision, adopting a two-stage least squares treatment effects regression. After addressing the selection bias, they find that privatization still has a positive impact on performance in India. This set of studies examines the effects of privatization on firm performance by comparing pre- and post-divestment data for companies privatized via public share offerings.

Each firm is compared to itself a few years earlier using inflation-adjusted sales and income data. The first study using this methodology is by Megginson, Nash, and van Randenborgh As Megginson and Netter note, this methodology suffers from several drawbacks, among which selection bias is probably the greatest concern, since privatizations through share sales—Share Issue Privatization SIPs —represent the largest companies sold during a privatization program.

Another weakness is that the Megginson, Nash, and van Randenborgh methodology can only examine simple accounting variables assets, sales, etc. Most of the studies in this tradition also imperfectly account for macroeconomic or industry changes in the pre- and post-privatization window see Megginson and Netter , for a critique.

These studies also cannot account for the impact on privatized firms of regulatory or market-opening initiatives that are often launched in parallel with privatization programs. However, the Megginson, Nash, and van Randenborgh methodology allows the analysis of large samples of firms from different industries, countries, and time periods and, while carrying the risk of selection bias, SIP samples contain the largest and most politically important privatizations.

Most of these studies do identify a significant improvement in company performance, post-privatization, though methodological reservations remain. Research in this tradition has focused on specific industries banking [ Verbrugge, Owens, and Megginson ] and tele-communications [ D'Souza and Megginson ] ; has used data from a single country Chile [ Maquieira and Zurita ] and employed multi-industry, multinational samples.

However, the significance of many of the operating and financial improvements is not robust to adjustments for changes experienced by other firms over the study period. A very recent work by Li et al. The authors are able to separate the pure privatization effect from the listing effect, using a database of Chinese SIPs from to matched with otherwise comparable state-owned enterprises and privately-owned firms. The second double-difference compares the performance change of privately-owned firms before and after their listing with the performance change of a control group of privately-owned firms that remain unlisted.

Interestingly, they continue to find a positive impact from privatization using this exacting methodology: they find a significant positive increase in profitability post-SIP in divested Chinese state-owned companies, even after the negative IPO listing effect is taken into account. The sectors covered include banking, telecommunications, and utilities.

To examine the reliability of the evidence in drawing policy conclusions, we classify the papers reviewed into four categories depending on the quality of the sample and the robustness of the methods used.

The studies reviewed by Clarke, Cull, and Shirley , which focus on developing countries and employ the Megginson, Nash, and van Randenborgh methodology or a stochastic frontier approach, find that bank performance usually improved after privatization.

For instance, Boubakri et al. The study by Beck, Cull, and Jerome in Nigeria shows that privatization can improve bank performance, even when the macroeconomic and regulatory environment is inhospitable and the government sells the weakest banks. However, Beck, Cull, and Jerome argue that an adverse macroeconomic and regulatory environment reduces the benefits of privatization. The studies surveyed by Clarke, Cull, and Shirley also find that bank privatization has a greater positive effect when it is total rather than partial.

Furthermore, there is evidence that privatization boosts competition in the banking sector. For instance, Otchere examines share-issue privatizations in nine countries using the Megginson, Nash, and van Randenborgh methodology and finds that rival banks suffered abnormally negative returns following privatization announcements, which suggests that shareholders expected more intense competition and lower returns.

Thus, evidence suggests that performance improves more when the government fully relinquishes control; when banks are privatized to strategic investors rather than through share issues; and when bidding is open to all, including foreign banks Clarke, Cull, and Shirley ; Megginson A more recent paper by Clarke, Cull, and Fuchs , which examines the privatization of Uganda Commercial Bank UCB to the South African bank Stanbic, shows that these elements of best practice also apply when the banking sector is concentrated and under-developed.

The government fully relinquished control to a strategic investor in an open sales process that allowed foreign participation, and the authors found that profitability improved post-privatization with no evidence that outreach declined. A similar impact of privatization to a foreign bank has been found in the case study of the privatization of Tanzania's national bank of commerce to the Dutch Rabobank Cull and Spreng One of the first telecom studies focused on developing countries, by Wallsten , used a panel of 30 African and Latin American countries from to with a methodology similar to Megginson, Nash, and van Randenborgh.

Overall, the author finds that competition is significantly associated with increases in per capita access and decreases in costs. However, privatization alone is associated with few benefits, and is negatively correlated with connection capacity. In addition, privatization only improves performance when coupled with effective and independent regulation and increases in competition. More recently, Gasmi et al. These authors find that the impact of privatization on sector outcomes fixed-line deployment, cellular deployment, labor efficiency, price of fixed-line was positive in the OECD countries, Central America, and the Caribbean, and in resource-scarce coastal Africa and Asia.

However, the impact was negative in South America and in African resource-scarce landlocked countries, and no significance was identified in resource-rich African countries. Gasmi et al. In contrast, privatization outcomes proved to be poor in South America, in both resource-scarce landlocked African countries and resource-rich African countries due to weak contractual design and inadequate enforcement of policies in the infrastructure sector, as well as insufficient aggregate demand.

In the absence of strong state capacity, competition appeared to be a more effective instrument to foster performance than privatization. The extent of infrastructure privatization also diverged across regions.

Overall, the study by Gasmi et al. As such, the authors conclude that there is no unique model of reform for infrastructure sectors. Turning to water privatization, Estache and Rossi estimate a stochastic cost frontier using data from a sample of 50 water companies in 29 Asian and Pacific countries. These authors find that efficiency is not significantly different in private and public companies. Kirkpatrick, Parker, and Zhang use a questionnaire survey on water utilities in Africa, covering 13 countries and 14 utilities that reported private sector involvement, and undertake data envelopment analysis and stochastic cost frontier techniques.

These authors do not find strong evidence of performance differences between state-owned water utilities and water utilities involving some private capital. The authors consider that this result is related to the technology of water provision, the costs of organizing long-term concession agreements, and regulatory weaknesses.

In particular, the authors argue that the nature of the product severely restricts the potential for competition and therefore the efficiency gains. But, as the authors explain, transaction costs can be high in the process of contracting for water services provision; for example, the costs of organizing the bidding process, monitoring contract performance, and enforcing contract terms where failures are suspected.

The importance of transparent competition for the market to achieve efficiency gains and prevent the grabbing of assets by political cronies was also evidenced by more recent research by Tan in the context of private participation in infrastructure PPI in water in Malaysia.

The author shows that the efficiency gains of water privatization measured by water loss and unit costs were inconclusive over the period to Despite this, and the subsequent renationalization of water assets, PPI continues to be promoted—it is being recast in the form of management contracts—because it provides captive rents.

In terms of privatizing electricity, the study of Zhang, Parker, and Kirkpatrick provides an econometric assessment using panel data for 36 developing and transition countries over the period to These authors examine the impact of these reforms on generating capacity, electricity generated, labor productivity in the generating sector, and capacity utilization. They find that, overall, the gains in economic performance from privatization and regulations are limited, while introducing competition is more effective to stimulate performance.

In particular, they do not find that privatization leads to improved labor productivity or to higher capital utilization, or to more generating capacity and higher output, except when it is coupled with the establishment of an independent regulator.

The authors conclude that when competition is weak, an effective regulatory system is needed to stimulate performance, while the regulation of state-owned enterprises without privatization is ineffective. A more recent study by Balza, Jimenez, and Mercado examines the relationship between private sector participation, institutional reform, and performance of the electricity sector in 18 Latin American countries over the last four decades to This also finds that, regardless of the level of private participation, well-designed and stable sectoral institutions are essential for improving the performance of the electricity sector.

In particular, privatization is robustly associated with improvements in quality and efficiency, but not with accessibility to the service. In contrast, regulatory quality is strongly associated with better performance in terms of both quality and accessibility. To bring together this evidence and evaluate its robustness as a basis for policy, we classify the papers reviewed in this section into four categories depending on the quality of the sample and the robustness of the methods used.

Category I: single country data, basic statistics, or econometrics or small sample. Category II: cross-country data, basic statistics, or econometrics or small sample. Category III: single country data, more advanced econometric techniques. Category IV: cross-country data, advanced econometric techniques. The findings are reported in table 1 and taken together, provide qualified evidence that privatization can improve company performance, including from studies that use the most advanced econometric methods.

Thus, the evidence from empirical studies of privatization in developing countries suggests that the performance of banks improved significantly after privatization in many cases. However, the gains from privatization in the utilities sector electricity and water have tended to be limited. Finally, concerning the telecommunications sector, the impact of privatization on efficiency and coverage varies by region. It has been shown to be positive in Central America and in resource-scarce coastal Africa and Asia, but negative in South America and in African resource-landlocked countries.

Thus, the impact appears to be context- as well as sector-specific. The main factors explaining this variation are regulatory quality and behind that the quality of institutions , heterogeneity in effective competition, differences in the detail of contractual design, and in the characteristics of the new owners.

Thomas Piketty's recent book , which has highlighted the importance of income distribution in the growth process, also discussed the impact of privatization on capital accumulation. In principle, privatization need not affect the stock of wealth in an economy, nor its distribution.

State-owned firms are public assets which earn a return for their owners. Provided the assets to be privatized are valued in such a way that their price represents the discounted sum of the profits to be earned from them, then privatization means that the state is replacing an income stream with its discounted capital value in its asset portfolio.

At the same time, the private sector is purchasing an asset which generates its full value over time from its annual earnings. Hence, privatization does not necessarily entail a net transfer of wealth between the public and private sectors. However, the privatization process has not always followed these principles of public finance Estrin et al. In the extreme, as in the programs in the Czech Republic or Russia, significant state assets were transferred to private hands at nominal or zero prices; in effect, a transfer of wealth from the state to the private sector.

More generally, state assets have frequently been undervalued. This may have been in order to make the assets more attractive to the market, or because the SOEs were loss-making and the short-term requirement to balance the budget dominated long-term state asset portfolio criteria.

In some cases, ideological arguments have also played a role; Margaret Thatcher and several of her admirers in transition economies viewed privatization as a policy mechanism for broadening the private ownership of shares in companies Estrin Whatever the motivation, the undervaluation of state assets leads to a net redistribution of assets from state to private hands.

Piketty argues that this was an important element in relatively larger growth of private wealth in Britain than in other Western European countries between and As the quotation from Piketty makes clear, the impact on income distribution of privatization depends on how the ownership of the assets is transferred from state into private hands; both the pricing and to whom the SOEs are privatized. In the extreme case when assets are transferred by voucher to each citizen equally from the state to private hands at a zero or nominal price, as in the Czech Republic, there is a transfer from public to private assets equal to the value of the privatized firms, but the impact on income distribution will be egalitarian because the process transfers shares to all citizens equally.

In contrast, if assets are freely transferred to a single wealthy individual, the impact will be to severely worsen the distribution of income. In practice, state-owned assets that are transferred at below their market value are often also transferred to individuals who are already wealthy, leading to increasing inequality. Political factors may play a significant role in this process, with corrupt elites seizing state assets for themselves, or using them to reward their cronies or political supporters.

Thus, rather than being used to improve efficiency, privatization may be employed by the ruling group as a mechanism to redistribute wealth and resources. But negative distributional effects may also occur for reasons of perceived efficiency enhancement, for example because the state believes that particular private individuals are those most likely to be able to improve company performance.

This implies a trade-off between efficiency and equity objectives in the privatization process. Equity is supported by processes which engender dispersed ownership, while it is usually argued that efficiency is driven by concentrated ownership Estrin The empirical evidence highlights this trade-off; improvements in the performance of privatized firms have been found to depend on subsequent ownership arrangements Djankov and Murrell Notably, privatization to concentrated owners, such as to foreign firms or to small groups of strategic owners, yields greater improvements in performance than privatization to the general population via share offerings, or to managers and workers Estrin et al.

The effect of privatization on income distribution between taxpayers and the new owners depends both on the initial price and on the post-sale stream of value produced. There is no unambiguous prediction about the distributional effects of privatization, which will instead depend on initial conditions, the privatization process and the post-privatization political and economic environment. Any assessment of the effects should be dynamic and highly country-specific, depending on the political and economic context and its history.

However, they argue that there is scope for efficiency-enhancing privatization which also promotes equity in developing countries. We review below the distributional impacts of privatizations through their effect on ownership, employment, prices and their fiscal effects see table 2 for a summary.

As Megginson notes, in countries that have privatized through asset sales, the process has frequently been non-transparent and plagued by insider dealing and corruption. Moreover, the distributional impact of voucher privatizations has also been disappointing; in Russia and the Czech Republic, the returns on the vouchers were much lower than anticipated, and very small in comparison to what a very few well-connected groups of people obtained in the privatization process Birdsall and Nellis Privatization can also affect the distribution of income through its impact on employment.

As public enterprises tend to be overstaffed prior to privatization, private ownership can lead to restructuring and consequently disproportionate redundancies for specific categories of worker low-skilled, for instance. That being said, if the newly-privatized firm becomes more efficient, total employment might recover after the initial restructuring phase. In addition, government-owned firms that do not privatize may also have to reduce workforce size. Research by Gupta on privatization in India covering the year period of to shows that privatization increases employment significantly and is not associated with a decline in employee compensation.

However, the employment costs of privatization will be borne by specific groups of workers, while the benefits, in terms of reduced subsidies, are distributed across taxpayers. Hence, privatization may face opposition from organized interests who benefit from maintaining government ownership. While Gupta's work is a single-country study, it has the merit of using more advanced econometric methods to control for dynamic selection bias by applying firm fixed effects and comparing privatized firms to a control group of firms that have also been selected for privatization but have not yet been sold.

In addition, the share of private ownership is introduced with a lag to reduce the possibility of simultaneity between privatization and performance. Privatization can also have different impacts on income groups through prices and access to services.

First, privatization can lead to a fall in prices if it is accompanied by increased competition. In addition, if private management leads to efficiency gains, some of the savings can be passed on to consumers. However, prices may increase if they were previously below cost-recovery level. Access may increase if the privatized business is expanded through investments which could not be undertaken in public ownership. However, private owners may decrease their engagement in specific, low-return market segments, which may disproportionately affect the poor.

Price increases are common following privatization in network or infrastructure industries, along with increases in the quality of services.

On the one hand, subsidized services tend to benefit relatively wealthy consumers more than poorer ones; as such, they may be relatively more impacted than the lower-income segment by privatization.

On the other hand, price increases following the privatization of electricity and water will increase the burden of poorer consumers, especially if it is accompanied by the end of illegal water and electricity connections Birdsall and Nellis Several studies in Latin America have shown that utility privatization has in fact led to network expansion and increased access to the service by the population, especially the rural poor for Peru, see Torero and Pasco-Font ; for Argentina, see Chisari, Estache, and Romero , Delfino and Casarin , and Ennis and Pinto ; for Bolivia, see Barja and Urquiola ; for Mexico, see Lopez-Calva and Rosellon This increased network coverage has often been the consequence of market expansion enabled by private investment capital see Clarke, Kosec, and Wallsten When access has increased significantly without a steep rise in prices, privatization has had positive distributional effects Birdsall and Nellis However, increased access has often been accompanied by substantial price increases Estache, Foster, and Wodon In addition, an important negative distributional impact has been realized through the elimination of illegal connections to electricity and water networks by lower-income people.

A recent paper by Hailu, Guerreiro-Osorio, and Tsukada on water service privatization in Bolivia in the late s and early s shows how tariff increases required for full cost recovery may lead to adverse privatization outcomes; in this case, the eventual renationalization of the company.

To examine the impact of privatization on access, the authors use a difference-in-difference approach comparing two groups: households in cities where the utility was privatized, and households in other cities, with two points in time, before and after and privatization. These authors find a positive relationship between access to water and living in cities where the water utility was privatized.

However, the water sector was renationalized in , partly because of popular movements against the tariff increases required for full cost recovery and the failure of the concessionaire to meet targets stipulated in the contract. Finally, Austin, Descisciolo, and Samuelsen point to the limits of privatization in sectors with public goods characteristics. Examining the privatization of healthcare in 99 less-developed nations over the — period, they employ two-way fixed effects ordinary least squares regression models.

The fixed effects allow them to deal with unmeasured, time-invariant variables that are excluded from a regression model. They regress tuberculosis prevalence per , on the log of private health expenditures, the log of public health expenditures and a set of controls economic development, education, HIV prevalence and access to water and sanitation.

They find that, while public health expenditures reduce tuberculosis rates in developing nations over time, this is not the case for private health expenditures. The fiscal effects of privatization on income distribution are indirect and come through changes in revenues and expenditures. In particular, privatization may affect real income net of taxes if it reduces the tax burden differentially across households, or if it leads to increased access by the poor to government services funded by new tax flows.

The study of Davis et al. In some countries, the main fiscal benefits of privatization have been to eliminate subsidies.

Subsidies in critical infrastructure services have often led to the rationing of under-priced services, hardly affecting poorer households that often had little or no access to these services, while the non-poor enjoyed the underpriced access. To the extent that privatization stops these flows of subsidies, it produces indirect benefits in terms of increased retained revenues Birdsall and Nellis , which could indirectly benefit the poor.

The traditional literature, primarily concerning developed economies, argued that privatization had largely positive effects on the economic and financial performance of the companies involved, as well as wider spillover benefits, for example, via technological diffusion from foreign ownership of former SOEs and enhanced efficiency from the privatization of utilities and other forms of infrastructure.

Moreover, privatization programs also frequently achieved additional objectives, including the generation of revenues to relax state budget constraints and a broadening of share ownership amongst the population.

On this basis, privatization became an important element of reform programs in transition and then developing economies from the s. The experience of the past twenty years leaves some of these conclusions unchanged, but leads us to a more nuanced evaluation of the effects of privatization in the context of economic development.

In particular, though state sectors are often very large in developing economies, it has been hard to establish widespread privatization programs in many parts of the world, partly because of political opposition. This has arisen for a variety of reasons.

First, the record of privatization as it spread to middle income and then transition economies including China was not always so positive as in developed economies. The lesson of the transition economy experience was that privatization was not always a panacea: if the mode of privatization was inappropriate or the market environment not competitive, privatization might not enhance the performance of the firms involved Estrin et al. Moreover, privatization programs were associated with scandals: inappropriate valuations led to the emergence of extreme inequalities of wealth.

Second, in developing economies where the institutional environment, particularly with respect to regulation of monopolies, was sometimes even weaker than in transition economies, the benefits of privatization were even less automatic, depending on the sector, and were contingent to a significant degree on the design of the privatization program.

Third, distributional issues are especially significant in developing economies, so privatization programs also had to consider distributional impacts in ways that had been less relevant for developed economies; opposition rested on issues raised by the efficiency-equity trade-off.

Finally, political economy issues are perhaps of even greater consequence for policy choices in developing economies, and privatization programs are especially open to manipulation by extractive political institutions and elites in fragmented political environments.

This long list of concerns has meant that the spread of privatization programs to developing countries has been limited, both geographically and with respect to sectoral reach. The slowdown in privatization has no doubt been exacerbated by the global recession of and the resulting flight from risk, which has particularly affected stock markets in developing economies. Moreover, the evidence about the effects of such privatizations of economic performance is quite nuanced.

To be successful, a privatization program needs to align its objectives with its methods of privatization, taking into account the sector in which the company operates and the national, institutional, and political context.