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Mr. Richard Hemming
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Mr. Ali M. Mansoor
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Abstract

This paper examines the role that privatization can play within a wider strategy designed to overcome the problems associated with public enterprises. For this purpose, privatization is defined as a transfer of ownership and control from the public to the private sector, with particular reference to asset sales. It is therefore equated with total or partial denationalization. Economic efficiency is not only the key to improving the performance of the public enterprise sector, but is also the source of other gains often attributed to privatization, in particular, its favorable budgetary impact. To public enterprises that are subject to national or international competition, privatization offers the possibility of increased productive efficiency as government financial backing is withdrawn and bankruptcy and takeover become possibilities. The admissibility and desirability of privatization, as well as what types of enterprise should be privatized, ought to be determined by similar considerations in both industrial and developing countries.

References

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  • Ashworth, Mark, John Hills, and Nick Morris, Public Finances in Perspective, Report Series No. 8 (London: Institute for Fiscal Studies, 1984).

    • Search Google Scholar
    • Export Citation
  • Atkinson, Anthony B., and Joseph E. Stiglitz, Lectures on Public Economics (New York: McGraw-Hill, 1980).

  • Barro, Robert J., Are Government Bonds Net Wealth?,” Journal of Political Economy (Chicago), Vol. 82 (November-December 1974), pp. 10951117.

    • Search Google Scholar
    • Export Citation
  • Baumol, William J., John C. Panzar, and Robert D. Willig, Contestable Markets and the Theory of Industry Structure (New York: Harcourt, Brace, Jovanovich, 1982).

    • Search Google Scholar
    • Export Citation
  • Beesley, Michael, and Stephen Littlechild, Privatization: Principles, Problems and Priorities,” Lloyds Bank Review (London), No. 149 (July 1983), pp. 120.

    • Search Google Scholar
    • Export Citation
  • Berg, Eliot J., Changes in the Public-Private Mix: A Survey of Some Recent Experiences in LDCs” (unpublished, International Monetary Fund, 1983).

    • Search Google Scholar
    • Export Citation
  • Berg, Eliot J., Divestiture of State-Owned Enterprises in LDCs” (unpublished, Washington, World Bank, 1985).

  • Borcherding, Thomas E., Werner W. Pommerehne, and Friedrich Schneider, Comparing the Efficiency of Private and Public Production: The Evidence from Five Countries,” Zeitschrift fur Nationalökonomie, Supplement 2 (1982), pp. 12756.

    • Search Google Scholar
    • Export Citation
  • Brittan, Samuel, Privatization: A Comment on Kay and Thompson,” Economic Journal (London), Vol. 96 (March 1986), pp. 3338.

  • Buiter, W.H, Measurement of the Public Sector Deficit and Its Implications for Policy Evaluation and Design,” Staff Papers, International Monetary Fund (Washington), Vol. 30 (June 1983a).

    • Search Google Scholar
    • Export Citation
  • Buiter, W.H, The Theory of Optimum Deficits and Debt,” in The Economics of Large Government Deficits (Boston: Federal Reserve Bank of Boston, 1983b).

    • Search Google Scholar
    • Export Citation
  • Byatt, Ian, Market and Non-Market Alternatives in the Public Supply of Public Services: British Experience with Privatization,” in Public Expenditure and Government Growth, ed. by Francesco Forte and Alan Peacock (Oxford: Basil Blackwell, 1985).

    • Search Google Scholar
    • Export Citation
  • Heller, Peter S., Richard D. Haas, and Ahsan S. Mansur, A Review of the Fiscal Impulse Measure, Occasional Paper No. 44 (Washington: International Monetary Fund, 1986).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, Fund-Supported Programs, Fiscal Policy, and Income Distribution, Occasional Paper No. 46 (Washington: International Monetary Fund, 1986).

    • Search Google Scholar
    • Export Citation
  • Kay, John A., and Mervyn A. King, The British Tax System (Oxford: Oxford University Press, 1983).

  • Kay, John A., and Mervyn A. King, and Z. Aubrey Silberston, The New Industrial Policy—Privatisation and Competition,” Midland Bank Review (London), Spring 1984, p. 8.

    • Search Google Scholar
    • Export Citation
  • Kay, John A., and Mervyn A. King, and David J. Thompson, Privatisation: A Policy in Search of a Rationale,” Economic Journal (London), Vol. 96 (March 1986), pp. 3338.

    • Search Google Scholar
    • Export Citation
  • Klein, Rudolf, Privatization and the Welfare State,” Lloyds Bank Review (London), No. 151 (January 1984), pp. 1219.

  • Mansoor, Ali M., The Budgetary Impact of Privatization” (unpublished, Washington, International Monetary Fund, October 1987).

  • Marchese, C., Market and Non-Market Alternatives in the Public Supply of Public Services: Some Empirical Evidence,” in Public Expenditure and Government Growth, ed. by Francesco Forte and Alan Peacock (Oxford: Basil Blackwell, 1985).

    • Search Google Scholar
    • Export Citation
  • Martinelli, A., The Italian Experience: A Historical Perspective,” in State-Owned Enterprise in the Western Economies, ed. by Raymond Vernon and Yair Aharoni (New York: St. Martin’s Press, 1980).

    • Search Google Scholar
    • Export Citation
  • Mayer, Colin P., and Shirley A. Meadowcroft, Selling Public Assets: Techniques and Financial Implications,” Fiscal Studies (Oxford), Vol. 6 (November 1985), pp. 4255.

    • Search Google Scholar
    • Export Citation
  • Millward, Robert, The Comparative Performance of Public and Private Ownership,” in The Mixed Economy, ed. by Eric Roll (London: Macmillan, 1982).

    • Search Google Scholar
    • Export Citation
  • Niskanen, William Arthur, Bureaucracy and Representative Government (Chicago: Aldine-Atherton, 1971).

  • Papps, Ivy, Government and Enterprise: An Analysis of the Economics of Governmental Regulation or Control of Industry (London: Institute of Economic Affairs, 1975).

    • Search Google Scholar
    • Export Citation
  • Paul, Samuel, Privatization and the Public Sector,” Finance and Development (Washington), Vol. 22 (December 1985), pp. 4245.

  • Pirie, Masden, Dismantling the State: The Theory and Practice of Privatization (Dallas: National Center for Policy Analysis, 1985).

  • Posner, Michael, Privatization: The Frontier Between Public and Private,” Policy Studies (London), Vol. 5 (July 1984), pp. 2232.

    • Search Google Scholar
    • Export Citation
  • Pryke, Richard, Public Enterprise in Practice (London: MacGibbon and Kee, 1971).

  • Pryke, Richard, Comparative Performance of Public and Private Enterprise,” Fiscal Studies (Oxford), Vol. 3 (July 1982), pp. 6881.

    • Search Google Scholar
    • Export Citation
  • Rees, Ray, Is There an Economic Case for Privatization?” Public Money (London), Vol. 5 (March 1986), pp. 1926.

  • Sharpe, Thomas, The Control of Natural Monopoly by Franchising,” in Franchising in the Public Sector (London: Public Money, 1983).

  • Shepherd, William G., Contestability vs. Competition,” American Economic Review (Nashville, Tennessee), Vol. 74 (September 1984), pp. 57287.

    • Search Google Scholar
    • Export Citation
  • Short, R.P., The Role of Public Enterprises: An International Statistical Comparison,” in Public Enterprise in Mixed Economies: Some Macroeconomic Aspects, by Robert H. Floyd, Clive S. Gray, and R.P. Short (Washington: International Monetary Fund, 1984).

    • Search Google Scholar
    • Export Citation
  • Vickers, John S., Economics of Predatory Practices,” Fiscal Studies (Oxford), Vol. 6 (August 1985), pp. 2436.

  • Vickers, John S., and George K. Yarrow, Privatization and the Natural Monopolies (London: Public Policy Centre, 1985).

  • Yarrow, George K., Privatization in Theory and Practice,” Economic Policy: A European Forum (Cambridge, United Kingdom), Vol. 1 (April 1986), pp. 32364.

    • Search Google Scholar
    • Export Citation

Occasional Papers of the International Monetary Fund

2. Economic Stabilization and Growth in Portugal, by Hans O. Schmitt. 1981.

5. Trade Policy Developments in Industrial Countries, by S.J. Anjaria, Z. Iqbal, L.L. Perez, and W.S. Tseng. 1981.

6. The Multilateral System of Payments: Keynes, Convertibility, and the International Monetary Fund’s Articles of Agreement, by Joseph Gold. 1981.

8. Taxation in Sub-Saharan Africa. Part I: Tax Policy and Administration in Sub-Saharan Africa, by Carlos A. Aguirre, Peter S. Griffith, and M. Zühtü Yücelik. Part II: A Statistical Evaluation of Taxation in Sub-Saharan Africa, by Vito Tanzi. 1981.

10. International Comparisons of Government Expenditure, by Alan A. Tait and Peter S. Heller. 1982.

11. Payments Arrangements and the Expansion of Trade in Eastern and Southern Africa, by Shailendra J. Anjaria, Sena Eken, and John F. Laker. 1982.

12. Effects of Slowdown in Industrial Countries on Growth in Non-Oil Developing Countries, by Morris Goldstein and Mohsin S. Khan. 1982.

13. Currency Convertibility in the Economic Community of West African States, by John B. McLenaghan, Saleh M. Nsouli, and Klaus-Walter Riechel. 1982.

14. International Capital Markets: Developments and Prospects, 1982, by a Staff Team Headed by Richard C. Williams, with G.G. Johnson. 1982.

15. Hungary: An Economic Survey, by a Staff Team Headed by Patrick de Fontenay. 1982.

16. Developments in International Trade Policy, by S.J. Anjaria, Z. Iqbal, N. Kirmani, and L.L. Perez. 1982.

17. Aspects of the International Banking Safety Net, by G.G. Johnson, with Richard K. Abrams. 1983.

18. Oil Exporters’ Economic Development in an Interdependent World, by Jahangir Amuzegar. 1983.

19. The European Monetary System: The Experience, 1979-82, by Horst Ungerer, with Owen Evans and Peter Nyberg. 1983.

20. Alternatives to the Central Bank in the Developing World, by Charles Collyns. 1983.

22. Interest Rate Policies in Developing Countries: A Study by the Research Department of the International Monetary Fund. 1983.

24. Government Employment and Pay: Some International Comparisons, by Peter S. Heller and Alan A. Tait. 1983. Revised 1984.

26. The Fund, Commercial Banks, and Member Countries, by Paul Mentré. 1984.

28. Exchange Rate Volatility and World Trade: A Study by the Research Department of the International Monetary Fund. 1984.

29. Issues in the Assessment of the Exchange Rates of Industrial Countries: A Study by the Research Department of the International Monetary Fund. 1984

30. The Exchange Rate System—Lessons of the Past and Options for the Future: A Study by the Research Department of the International Monetary Fund. 1984

33. Foreign Private Investment in Developing Countries: A Study by the Research Department of the International Monetary Fund. 1985.

34. Adjustment Programs in Africa: The Recent Experience, by Justin B. Zulu and Saleh M. Nsouli. 1985.

35. The West African Monetary Union: An Analytical Review, by Rattan J. Bhatia. 1985.

36. Formulation of Exchange Rate Policies in Adjustment Programs, by a Staff Team Headed by G.G. Johnson. 1985.

38. Trade Policy Issues and Developments, by Shailendra J. Anjaria, Naheed Kirmani, and Arne B. Petersen. 1985.

39. A Case of Successful Adjustment: Korea’s Experience During 1980-84, by Bijan B. Aghevli and Jorge Márquez-Ruarte. 1985.

41. Fund-Supported Adjustment Programs and Economic Growth, by Mohsin S. Khan and Malcolm D. Knight. 1985.

42. Global Effects of Fund-Supported Adjustment Programs, by Morris Goldstein. 1986.

44. A Review of the Fiscal Impulse Measure, by Peter S. Heller, Richard D. Haas, and Ahsan H. Mansur. 1986.

45. Switzerland’s Role as an International Financial Center, by Benedicte Vibe Christensen. 1986.

46. Fund-Supported Programs, Fiscal Policy, and Income Distribution: A Study by the Fiscal Affairs Department of the International Monetary Fund. 1986.

47. Aging and Social Expenditure in the Major Industrial Countries, 1980-2025, by Peter S. Heller, Richard Hemming, Peter W. Kohnert, and a Staff Team from the Fiscal Affairs Department. 1986.

48. The European Monetary System: Recent Developments, by Horst Ungerer, Owen Evans, Thomas Mayer, and Philip Young. 1986.

49. Islamic Banking, by Zubair Iqbal and Abbas Mirakhor. 1987.

50. Strengthening the International Monetary System: Exchange Rates, Surveillance, and Objective Indicators, by Andrew Crockett and Morris Goldstein. 1987.

51. The Role of the SDR in the International Monetary System, by the Research and Treasurer’s Departments of the International Monetary Fund. 1987.

52. Structural Reform, Stabilization, and Growth in Turkey, by George Kopits. 1987.

53. Floating Exchange Rates in Developing Countries: Experience with Auction and Interbank Markets, by Peter J. Quirk, Benedicte Vibe Christensen, Kyung-Mo Huh, and Toshihiko Sasaki. 1987.

54. Protection and Liberalization: A Review of Analytical Issues, by W. Max Corden. 1987.

55. Theoretical Aspects of the Design of Fund-Supported Adjustment Programs: A Study by the Research Department of the International Monetary Fund. 1987.

56. Privatization and Public Enterprises, by Richard Hemming and Ali M. Mansoor. 1988.

International Monetary Fund, Washington, D.C. 20431, U.S.A.

Telephone number 202 623-7430

Cable address: Interfund

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  • Alchian, A. A., Some Economics of Property Rights,” Il Politico, Vol. 30 (1965).

  • Ashworth, Mark, John Hills, and Nick Morris, Public Finances in Perspective, Report Series No. 8 (London: Institute for Fiscal Studies, 1984).

    • Search Google Scholar
    • Export Citation
  • Atkinson, Anthony B., and Joseph E. Stiglitz, Lectures on Public Economics (New York: McGraw-Hill, 1980).

  • Barro, Robert J., Are Government Bonds Net Wealth?,” Journal of Political Economy (Chicago), Vol. 82 (November-December 1974), pp. 10951117.

    • Search Google Scholar
    • Export Citation
  • Baumol, William J., John C. Panzar, and Robert D. Willig, Contestable Markets and the Theory of Industry Structure (New York: Harcourt, Brace, Jovanovich, 1982).

    • Search Google Scholar
    • Export Citation
  • Beesley, Michael, and Stephen Littlechild, Privatization: Principles, Problems and Priorities,” Lloyds Bank Review (London), No. 149 (July 1983), pp. 120.

    • Search Google Scholar
    • Export Citation
  • Berg, Eliot J., Changes in the Public-Private Mix: A Survey of Some Recent Experiences in LDCs” (unpublished, International Monetary Fund, 1983).

    • Search Google Scholar
    • Export Citation
  • Berg, Eliot J., Divestiture of State-Owned Enterprises in LDCs” (unpublished, Washington, World Bank, 1985).

  • Borcherding, Thomas E., Werner W. Pommerehne, and Friedrich Schneider, Comparing the Efficiency of Private and Public Production: The Evidence from Five Countries,” Zeitschrift fur Nationalökonomie, Supplement 2 (1982), pp. 12756.

    • Search Google Scholar
    • Export Citation
  • Brittan, Samuel, Privatization: A Comment on Kay and Thompson,” Economic Journal (London), Vol. 96 (March 1986), pp. 3338.

  • Buiter, W.H, Measurement of the Public Sector Deficit and Its Implications for Policy Evaluation and Design,” Staff Papers, International Monetary Fund (Washington), Vol. 30 (June 1983a).

    • Search Google Scholar
    • Export Citation
  • Buiter, W.H, The Theory of Optimum Deficits and Debt,” in The Economics of Large Government Deficits (Boston: Federal Reserve Bank of Boston, 1983b).

    • Search Google Scholar
    • Export Citation
  • Byatt, Ian, Market and Non-Market Alternatives in the Public Supply of Public Services: British Experience with Privatization,” in Public Expenditure and Government Growth, ed. by Francesco Forte and Alan Peacock (Oxford: Basil Blackwell, 1985).

    • Search Google Scholar
    • Export Citation
  • Heller, Peter S., Richard D. Haas, and Ahsan S. Mansur, A Review of the Fiscal Impulse Measure, Occasional Paper No. 44 (Washington: International Monetary Fund, 1986).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, Fund-Supported Programs, Fiscal Policy, and Income Distribution, Occasional Paper No. 46 (Washington: International Monetary Fund, 1986).

    • Search Google Scholar
    • Export Citation
  • Kay, John A., and Mervyn A. King, The British Tax System (Oxford: Oxford University Press, 1983).

  • Kay, John A., and Mervyn A. King, and Z. Aubrey Silberston, The New Industrial Policy—Privatisation and Competition,” Midland Bank Review (London), Spring 1984, p. 8.

    • Search Google Scholar
    • Export Citation
  • Kay, John A., and Mervyn A. King, and David J. Thompson, Privatisation: A Policy in Search of a Rationale,” Economic Journal (London), Vol. 96 (March 1986), pp. 3338.

    • Search Google Scholar
    • Export Citation
  • Klein, Rudolf, Privatization and the Welfare State,” Lloyds Bank Review (London), No. 151 (January 1984), pp. 1219.

  • Mansoor, Ali M., The Budgetary Impact of Privatization” (unpublished, Washington, International Monetary Fund, October 1987).

  • Marchese, C., Market and Non-Market Alternatives in the Public Supply of Public Services: Some Empirical Evidence,” in Public Expenditure and Government Growth, ed. by Francesco Forte and Alan Peacock (Oxford: Basil Blackwell, 1985).

    • Search Google Scholar
    • Export Citation
  • Martinelli, A., The Italian Experience: A Historical Perspective,” in State-Owned Enterprise in the Western Economies, ed. by Raymond Vernon and Yair Aharoni (New York: St. Martin’s Press, 1980).

    • Search Google Scholar
    • Export Citation
  • Mayer, Colin P., and Shirley A. Meadowcroft, Selling Public Assets: Techniques and Financial Implications,” Fiscal Studies (Oxford), Vol. 6 (November 1985), pp. 4255.

    • Search Google Scholar
    • Export Citation
  • Millward, Robert, The Comparative Performance of Public and Private Ownership,” in The Mixed Economy, ed. by Eric Roll (London: Macmillan, 1982).

    • Search Google Scholar
    • Export Citation
  • Niskanen, William Arthur, Bureaucracy and Representative Government (Chicago: Aldine-Atherton, 1971).

  • Papps, Ivy, Government and Enterprise: An Analysis of the Economics of Governmental Regulation or Control of Industry (London: Institute of Economic Affairs, 1975).

    • Search Google Scholar
    • Export Citation
  • Paul, Samuel, Privatization and the Public Sector,” Finance and Development (Washington), Vol. 22 (December 1985), pp. 4245.

  • Pirie, Masden, Dismantling the State: The Theory and Practice of Privatization (Dallas: National Center for Policy Analysis, 1985).

  • Posner, Michael, Privatization: The Frontier Between Public and Private,” Policy Studies (London), Vol. 5 (July 1984), pp. 2232.

    • Search Google Scholar
    • Export Citation
  • Pryke, Richard, Public Enterprise in Practice (London: MacGibbon and Kee, 1971).

  • Pryke, Richard, Comparative Performance of Public and Private Enterprise,” Fiscal Studies (Oxford), Vol. 3 (July 1982), pp. 6881.

    • Search Google Scholar
    • Export Citation
  • Rees, Ray, Is There an Economic Case for Privatization?” Public Money (London), Vol. 5 (March 1986), pp. 1926.

  • Sharpe, Thomas, The Control of Natural Monopoly by Franchising,” in Franchising in the Public Sector (London: Public Money, 1983).

  • Shepherd, William G., Contestability vs. Competition,” American Economic Review (Nashville, Tennessee), Vol. 74 (September 1984), pp. 57287.

    • Search Google Scholar
    • Export Citation
  • Short, R.P., The Role of Public Enterprises: An International Statistical Comparison,” in Public Enterprise in Mixed Economies: Some Macroeconomic Aspects, by Robert H. Floyd, Clive S. Gray, and R.P. Short (Washington: International Monetary Fund, 1984).

    • Search Google Scholar
    • Export Citation
  • Vickers, John S., Economics of Predatory Practices,” Fiscal Studies (Oxford), Vol. 6 (August 1985), pp. 2436.

  • Vickers, John S., and George K. Yarrow, Privatization and the Natural Monopolies (London: Public Policy Centre, 1985).

  • Yarrow, George K., Privatization in Theory and Practice,” Economic Policy: A European Forum (Cambridge, United Kingdom), Vol. 1 (April 1986), pp. 32364.

    • Search Google Scholar
    • Export Citation