Front Matter

Front Matter

Editor(s):
Saíd El-Naggar
Published Date:
June 1989
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    Privatization and Structural Adjustment in the Arab Countries

    Edited by

    Said El-Naggar

    Papers presented at a seminar held in Abu Dhabi, United Arab Emirates, December 5-7, 1988

    © International Monetary Fund, 1989

    Reprinted April 1993

    Cover design by IMF Graphics Section

    Library of Congress Cataloging-in-Publication Data

    Privatization and structural adjustment in the Arab countries: papers presented at a seminar held in Abu Dhabi, United Arab Emirates, December 5–7, 1988 / edited by Said El-Naggar.

    p. cm.

    ISBN 9781557750426

    1. Privatization—Arab countries—Congresses. 2. Arab countries—Economic policy—Congresses. I. El-Naggar, Sa’ id, 1920- II. International Monetary Fund.

    HD4334.P75 1989

    338.9’2—dc20 89-7407

    Price: US$18.50

    Address orders to:

    International Monetary Fund, Publication Services

    700 19th Street, N.W., Washington, D.C. 20431, U.S.A.

    Telephone: (202) 623-7430

    Telefax: (202) 623-7201

    Cable: Interfund

    Sponsoring Organizations

    • The Arab Monetary Fund

    • The International Monetary Fund

    • The United Nations Development Program

    • The United Nations Economic and Social Commission for Western Asia

    Foreword

    The Arab Monetary Fund must be complimented for having brought together such a distinguished group of experts to debate an issue that has become increasingly important, namely, the economics of privatization. We at the Fund were happy indeed to be associated with this seminar.

    The distinguished seminar moderator, Professor Said El-Naggar, reviews the experience of the public sector especially in Egypt and finds its dominance to have weighed heavily on national budgets and the balance of payments. He also recognizes that the public sector must continue to play a vital role in managing important national resources, providing public utilities and other services that are best operated as natural monopolies and undertaking activities where capital requirements or high technology go beyond the current capabilities of the private sector. All the more reason to ensure that in all such cases performance be held to high standards of efficiency and financial rectitude so as to maximize the public sector’s contribution to growth and welfare.

    It seems appropriate, in this context, to recall part of the remarkable passage from Ibn-Khaldun’s “The Muquaddimah” that is quoted elsewhere in this volume. More than five centuries ago, this Arab historian and sociologist observed that:

    Government finances can be increased and its resources improved only through the revenue from taxes. The latter can be in turn increased only through the equitable treatment of individuals with property and regard for them. This makes their confidence rise, and they have the incentive to start making their capital bear fruit and grow. This in turn increases government revenues from taxes. Other measures taken by the government, such as directly engaging in commerce or agriculture, soon turn out to be harmful to the citizens, ruinous to the state revenues, and destructive to civilization.

    While the warning in the last sentence of the quotation may well have relevance even today, there is a different set of problems to be dealt with in moving to privatize segments of the economy that have been part of the public sector. The seminar proceedings are particularly valuable in taking note of some of the complex issues of transition, including the role of political leadership in overcoming the inertia of existing structures. The challenge facing the Arab world, or for that matter, other developing countries with large public sectors, is to place the privatization process within a wider context of structural change.

    Michel Camdessus

    Managing Director

    International Monetary Fund

    Acknowledgment

    This seminar was the fruit of collaborative effort between the Arab Monetary Fund, the International Monetary Fund (IMF), the United Nations Development Program (UNDP), and the United Nations Economic and Social Commission for Western Asia (ESCWA). The interest and support shown by these major organizations bear witness to the importance of the subject of this seminar.

    The issue of privatization has come to dominate the economic agenda in many countries, both developed and developing. In the latter, privatization is seen as a policy option that could play an important role in the process of adjustment and development. The Arab countries are no exception. In fact, most of them are faced with major external and internal imbalances that are reflected in slow growth, balance of payments deficits, high unemployment, and severe inflationary pressures. There is an obvious and pressing need to eliminate macroeconomic and structural distortions. In certain cases the public sector has proved to be a major source of distortion. While some public enterprises are making positive contributions to government revenue, many others constitute a significant drain on resources. In terms of economic efficiency, the public sector leaves much to be desired. Under these circumstances it is hardly surprising that governments are paying increased attention to the possible benefits to be derived from expanding the role of the private sector.

    The seminar provided an excellent opportunity for a number of high-level experts and policymakers to examine the issue of privatization in all its aspects. The eight papers that were presented at the seminar are included in this publication, together with the written comments of the discussants. In addition, the moderator prepared a paper, which appears as Chapter 1, in which he states his own personal views on issues that were raised in the seminar.

    On behalf of the participants I would like to express my thanks to His Highness Sheikh Surour bin Mohammed Al Nahyan, Grand Chamberlain to the President of the United Arab Emirates, under whose auspices the seminar was held in Abu Dhabi. At the opening session, his personal representative, Abu Malik Al Hamar, Governor of the Central Bank of the United Arab Emirates, delivered the keynote address. Moreover, the seminar would not have been possible without the active support of Mohammed Abdalla Nour, Assistant Administrator, UNDP, Mohammed Said Nabulsi, Executive Secretary, ESCWA, and Azizali Mohammed, Director, External Relations Department, and Ahmed Abushadi, IMF. To each of them I extend my appreciation and gratitude.

    A special word of thanks is due to Abdalla Al Kuwaiz, Director General and Chairman of the Board, Arab Monetary Fund, and to Rasheed Khalid and his collaborators for the excellent organization of the seminar and for their hospitality during our stay in Abu Dhabi. I would also like to thank Elin Knotter of the External Relations Department of the IMF for editing this volume and directing it from draft through publication.

    Said El-Naggar

    Moderator

    Contents

    The following symbols have been used throughout this book:

    … to indicate that data are not available;

    — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

    – between years or months (e.g., 1987–88 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

    / between years (e.g., 1987/88) to indicate a crop or fiscal (financial) year.

    “Billion” means a thousand million.

    Details may not add to totals shown because of rounding.

    The term “country,” as used in this book, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

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