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 Daily
Independent Online.
* Tuesday, June 22, 2004.
World Bank laments effects of shoddy
privatisation programmes
By Ntai Bagshaw
Development Reporter, Lagos
Privatisation programmes can
prove to be a costly failure if it is not implemented in a legislative
framework designed to protect investor and client interests, the World
Bank has warned.
In a report published last
week, the bank called for increased awareness of the many pitfalls of
public services privatisation in developing countries, stressing that
even if it contributes to the improvement of key sectors, privatisation
is not always the best solution.
The report recommends that in addition to
protecting investor/client interests, the legislative body must be isolated
from political interference and its decisions must be submitted for
approval by the judiciary or a non-political institution.
Pointing out that privatisation is not
perceived as a credible solution in many developing countries, the report
said field studies in Peru and Argentina showed that 80 per cent of the
population rejected the idea of privatisation. While the bank noted in
the report that “privatisation was oversimplified, oversold and
ultimately disappointing - delivering less than was promised,” it,
nonetheless, suggested the organisation is not inclined to cut lending
for infrastructure projects and argued that it actually may be
“legitimate” for the bank to boost such lending.
Economic studies, it argued further,
generally show that privatisation has had “favourable” economic
consequences in poor countries. Such studies have found complaints that
privatisation hurts poor people to be “largely exaggerated.”
Privatisation, “implemented correctly, offers benefits too big to ignore
- for governments, operators and consumers,” the report said. However,
“no public policy can be justified on purely economic grounds if a
country’s population considers its results unjust”. Accordingly, the
report said privatisation “should not be pursued in a specific country or
industry without carefully assessing its institutional and structural
prerequisites and without explicit attention to the concerns it raises.”
To generate more revenue, some fiscally
strapped governments have sold utilities as monopolies - accompanied by
regulation that ensures this outcome instead of prompting competition,
the bank’s report said. That practice tended to be “especially damaging
in poor countries,” because “privatised monopolists” were less likely to
improve services or expand coverage. Privatisation, moreover, took a high
toll “on the poorer half of the population because of large layoffs in
privatised utilities,” the report said. For some consumers, privatisation
led to higher prices - although the bank said it found no clear evidence
of a causal link between privatisation and higher utility prices.
In general, the report said, poor people
benefited from privatisation. “The negative effects of layoffs and higher
prices were more than offset by increased access for poor consumers, enhanced
service quality and changes in public financing that benefited poor
people more,” it said. Nevertheless, advocates of privatisation did a
poor job managing public expectations, the report added.
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