Chapter

9 Parastatal Reform and Privatization in Mali

Author(s):
Laura Wallace
Published Date:
May 1997
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Author(s)
Soumaïla Cissé

Mali suffered a severe economic and financial crisis in the early 1980s due to natural phenomena and, in particular, the implementation of inappropriate policies. This crisis caused stark imbalances: low growth combined with a high population increase; structural imbalances in government finance and the balance of payments; and inadequate savings to meet major investment needs.

Now, after several adjustment programs supported by the international community—and I would like to take this opportunity to thank the international community, on behalf of the Malian people, for its continuing assistance—we are seeing positive results. The various program reviews have shown that:

  • government finance is improving;

  • the economic growth rate has increased from 2.3 percent in 1994 to 6 percent in 1995;

  • inflation is being controlled after the change in the parity of the currency in 1994;

  • budgetary revenue is 13 percent higher than financial program projections;

  • the external debt is being fully serviced;

  • budgetary expenditure is being contained;

  • the economic environment for the private sector has improved, as have the legal conditions under which it operates; and

  • the government has totally or partially divested 44 public sector enterprises.

Certainly, the dawn of the Third Republic, after the first multiparty elections in Mali in 1992, was a decisive turning point in the political, economic, and social development of the Malian people.

Where have we come from? During the political and social unrest of March 1991, the productive base and the economic and financial administrations were devastated, and the very survival of the state was in jeopardy. Economic and financial losses were estimated at more than CFAF 30 billion—that is, some 5 percent of the nation’s wealth. Moreover, the authority of the government was eroded to the point where the security forces could no longer perform their functions and tax evasion was rampant.

In 1992, the emergence of a multiparty democracy immediately broadened the framework for consensus-building in public management. Political parties, labor unions, and civil associations proliferated. We even had an association of “victims of structural adjustment.” But interest group demands became more strident, with everyone clamoring for everything at once. And during these years, the education crisis—which continues to seriously threaten our future—reached a peak in 1993/94 with the closing of all schools. Students at all levels were making extreme demands, the most revealing one being their demand for a “perennial scholarship.”

The armed conflict in the northern part of the country continued until March 27, 1996, when, in an outburst of national unity, a “flame of peace” burned more than 3,000 weapons surrendered by the various warring factions. This social peace must still be consolidated, however, and the upcoming legislative and presidential elections of 1997 are fueling a new bout of protests.

Clearly our work is far from over, and the pitfalls are many. But we have seen promising results—results that are a consequence of both the profound change in the political context and the constantly evolving macroeconomic environment. In order for us to continue the structural reforms, and thus to fuel progress, support from our development partners is required.

I would now like to turn to Mali’s experience in the following areas: mobilizing budgetary revenue, reforming the financial sector, and reforming the nonfinancial sector.

Mobilizing Domestic Resources

Achieving a lasting improvement in the government’s budgetary situation is an essential component of Mali’s adjustment strategy. But it was not until 1994—despite many earlier adjustment programs—that the domestic resources mobilized finally exceeded the financial objectives of the program, a new trend that was consolidated in 1995.

What happened was that, in response to a frank diagnostic study, the financial authorities (including customs officials) drew up and implemented a plan of action. The initiatives included:

  • an ambitious investment program to rehabilitate and construct premises to house the tax assessment and tax collection services;

  • an on-the-job training and awareness program for the various categories of staff;

  • an appropriate communications campaign to restore tax compliance and to improve the image of tax collection officials in the eyes of the public;

  • an international import verification company to improve the monitoring of transactions at customs;

  • a reduction in the size of the staff of the financial administrations (mainly involving those that did not have the required training);

  • a major effort to simplify taxation and stabilize collection procedures; and

  • a system for weekly monitoring of public revenue and expenditure performance in the Ministry of Finance and Commerce.

This close monitoring of the adjustment program, involving all the senior officials of the Ministry, is the cornerstone of the system that has made such a good performance possible. The Bretton Woods institutions have noted these results, which demonstrates that the efforts made have not been in vain. Indeed, these efforts will be continued.

Financial Sector Reform

In a monetary union such as the one to which Mali belongs—the West African Economic and Monetary Union (WAEMU)—financial sector reform is still quite a sensitive issue, as the economies in the area adjust at different rates. Reform of economic policy instruments and regulations must be the subject of regional dialogue. However, the main problem remaining is to restore the confidence of the private sector.

Where do we stand? In the mid-1980s, government cash flow difficulties and poor management of the savings bank and postal checking system led to a freezing of the assets of small savers. The result was a mistrust of the banking system. Reform took a long time to complete: first, it sought to improve the security of private funds in the financial system by breaking the links between these funds and the financing of the public deficit, and then it sought to make these assets liquid.

The determining factor in the restoration of private transactors’ confidence lies in the fact that the government has had “visible” financial surpluses. Transactors have found that payment delays by the treasury have been much reduced and that domestic arrears have been paid in accordance with the announced program.

More recently, the financial crisis that affected the Meridien Group in 1994 has shown the government’s ability to react and to protect the interests of the private sector. This action helped strengthen the government’s credibility and improve confidence in the banking system.

Even so, neither the modern banking sector nor the informal sector (savings and loans, tontines, etc.) fund the national economy as they should, despite the fact that there is abundant liquidity. There are still blockages, and the guarantees and procedures required are still cumbersome.

With the World Bank’s help, we in Mali are looking at restructuring the banking and financial system with a view to improving bank intermediation and promoting investment. We are seeking to replace the government at the core of the financial system by issuing treasury bills, for which there is currently a demand in the private sector.

Reforms in Nonfinancial Sectors

Successful macroeconomic reform is conditional upon reforms in the nonfinancial sectors. Urgent action must be taken in the supply of goods and services to the poorest segments of the population. The scope and variety of needs create a problem of setting priorities, a crucially important step in stabilization.

In the area of education, no country has been able to develop with a school enrollment rate of less than 50 percent; this rate was 30 percent for Mali in 1994. With the support of a number of partners, including the World Bank, we have implemented an accelerated development program for basic education, which includes reforming educational practices to increase the number of students and improve the efficiency of human resources and teacher training. At the same time, a major program to build and outfit classrooms is under way.

In the area of infrastructure, the sectoral project that has just been put into effect will make it possible to rationalize the transport system, improve its financial performance, and make better use of and expand existing capacity.

In the area of health, the primary health care policy coming out of the Bamako initiative, recommended by the World Health Organization for all countries in Africa, has been satisfactorily implemented through the rural clean water and population project. Structural reforms in the area of public health are being completed with the liberalization of the practice of medical professions and the sale of drugs. The existing measures seek to make essential drugs widely available and to increase the number of community health centers, in the context of improving cost recovery. These steps will also make available more than 1,700 wells and watering places in areas where water supply needs are most acute.

The natural resource management project will allow farmers and local communities to permanently manage their land themselves. These communities first define their program, then the project provides them with financial assistance. These programs include a variety of activities: building dykes, supplying drinking water, constructing granaries, improving roads, and so on.

The public works job creation project made it possible to speed up urban sanitation, improve the performance of small enterprises engaged in public works, and create more than 35,000 jobs using labor-intensive techniques.

In the area of privatization, there are currently still 24 enterprises that are majority or entirely state-owned, and the government holds a minority share in 16 others.

We are trying to intensify the efforts made to date to increase the effectiveness of public services, reduce the burden of the public enterprise sector on the national budget, and broaden the participation of the private sector in all areas of economic life. The National Assembly requests that it be consulted concerning each enterprise involved in the privatization program. The established program may, therefore, undergo some modifications, which the government must bear in mind in its reform program.

Nonetheless, let me stress, in particular, the achievements in rural development through the Malian textile development company—Compagnie Malienne pour le Développement des Textiles (CMDT)—under successive projects supported by development partners.

Through the CMDT, wide-ranging five-year rural development programs were implemented. Today, it is unanimously acknowledged that this substantial financial support, amounting to a total of SDR 80.3 million, has been a success and has helped to make the CMDT efficient. The 1990 World Bank evaluation report says that the CMDT, through its competence and efficiency in project management and execution, is the top-performing cotton company in West Africa.

The three five-year programs completed have made it possible to:

  • expand cereal production, including corn, in which Mali has become self-sufficient;

  • promote village associations;

  • conduct literacy programs in villages;

  • supply inputs and extend loans to farmers;

  • protect the environment by combating soil erosion; and

  • develop and maintain rural roads and sources of drinking water.

Mali is now the second-largest African producer of cotton and we expect to be the first by the end of this decade. We now have the necessary capacity and are striving for excellence in managing the sector and in maintaining the industrial plant.

Conclusions

Mali is aware that it is an integral part of an economic and monetary union. The success of the economic policy conducted in the different countries will determine whether the present results are consolidated. The establishment of the WAEMU in 1994 will be a major asset for our future.

The outlook could be even better if a lasting solution were found to the debt problem, if external assistance were better coordinated, and if program design and management took better account of the changing environment resulting from the democratization of the political system, program “ownership,” and popular participation. Furthermore, it is essential for programs to be longer in duration so that their real, long-term prospects can materialize.

I believe that this is the only way for us to be able to board the train of human progress. Just as the inevitability of underdevelopment is a fallacy, so too is development not merely a matter of chance but a well thought out and managed process.

The ultimate goal of our action is to rid our people of the scourge of poverty, which is holding us back. This is a noble ambition, and we are grateful that this august gathering shares it.

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