Appendix 2. Insights for Privatization Plans from Previous Large Episodes

International Monetary Fund. Fiscal Affairs Dept.
Published Date:
September 2011
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This appendix analyzes past privatization episodes with a view to providing insights for current and future privatization plans.1 While past privatizations were often motivated by prospects of enhancing efficiency, governments facing fiscal pressures privatized to raise revenues—though the government’s net worth increases only if the firms being sold are more efficient, and thus more valuable, when they are operated by the private sector rather than being in public hands.

The analysis is based on proceeds from privatization transactions estimated by the World Bank for 116 developing countries2 between 1988 and 2008, and by the Privatization Barometer (PB) for 25 EU (EU25) countries between 1977 and 2009.3 Although the heterogeneity of the sources causes some data discrepancies (notably, the PB uses revenues net of privatization and restructuring costs, whereas for the most part the World Bank uses gross revenues), the data reveal some important overall trends: (i) privatization activity is not stable but evolves in waves, dropping off after 1997 but picking up, albeit modestly, in recent years; (ii) the average size of a transaction has increased over the years as countries have moved toward privatizing larger firms; (iii) in nominal terms, privatization proceeds are highly concentrated in a few large countries, but relative to GDP, proceeds are often more significant in small countries; (iv) the largest transactions are concentrated in the telecommunications and energy sectors, including utilities and the petroleum industry; (v) many but certainly not all large privatization episodes are related to the transition process of former socialist economies.

Overall Magnitude of Privatization Proceeds

Privatization has been widely adopted by governments around the world, with an estimated US$2 trillion raised since 1977 (Megginson, 2010), of which US$1 trillion stemmed from the EU25 and over US$700 billion from non-European developing and emerging economies as covered by the World Bank (Figure A2.1). There have been two major peaks in transaction volumes in the past 20 years, one in the late 1990s (1997–2000) and one that began in the mid-2000s (starting in 2004). While the value of proceeds has been higher in the second peak period, the number of transactions has been significantly lower than during the first peak. Average annual transaction receipts increased from US$0.9 billion to US$1.7 billion between the two periods. Proceeds in emerging economies of Latin America rose sharply in the later part of the 1990s, with the largest share coming from Argentina, Brazil, and Mexico. In more recent years, emerging countries in Asia and Europe, mainly China and Russia, have become the driving forces in global privatization efforts (Figure A2.2).

Figure A2.1.Number and Value of Privatization Transactions

Sources: World Bank; and Privatization Barometer (see note 2 in text).

Note: PB = Privatization Barometer; WB = World Bank. Value data refer to scale on left axis; number data refer to scale on right axis. See text for scope of coverage of each data set.

Figure A2.2.Value of Privatization Transactions in Developing and Emerging Economies (Excluding-EU25 Countries), 1988—2008

($US billions)

Sources: World Bank; and Privatization Barometer (see note 2 in text).

Note: WH denotes Western Hemisphere; MENA/CIS denotes Middle East and North Africa/Commonwealth of Independent States.

To focus on episodes of privatization that yielded sizable revenues, a systematic search was conducted for all nonoverlapping, country-specific 5-year windows with privatization proceeds of more than 5 percent of GDP.4 Over the past 20 years, out of the 141 countries included in the sample, 65 experienced at least one privatization episode with revenues of more than 5 percent of GDP. Eighteen countries had two nonoverlapping episodes, and Bulgaria had three.

Privatization episodes were especially pronounced in a few countries. Twelve counties experienced privatization episodes with receipts of more than 15 percent of GDP over five years. While proceeds from privatization have been sizable revenue sources as a share of GDP for several advanced economies, they have been even larger for transition, developing, and emerging economies (Table A2.1). More specifically, among advanced economies, the largest privatization proceeds within a 5-year window accrued to Portugal (15.7 percent of GDP, with an additional, adjacent window yielding another 7.9 percent of GDP). Eight other advanced economies collected proceeds in excess of 5 percent of GDP within five years. The largest proceeds within 5-year windows accrued to transition economies where most property was formerly owned by the government (Table A2.1) (see also Shafik, 1995). The magnitude of proceeds for these countries underlines that privatizations have been an important element in the process of economic liberalization. The single largest episodes occurred in Kazakhstan and Latvia, each collecting more than 30 percent of privatization proceeds between 1994 and 1998.5 Among other economies, too, both developing and emerging, proceeds from privatization were sizable. In some cases they were related to a small number of large transactions (for example, Bolivia generated proceeds of 20 percent of GDP in a single transaction when granting 8-year exploitation rights for an iron ore deposit). In other cases they stemmed from many transactions (for example, Zambia accumulated proceeds of 23 percent of GDP over a 5-year period with close to 50 transactions, of which the largest accounted for less than 7 percent of GDP).

A Closer Look at Privatization Episodes in Advanced Europe

As data on privatization transactions are available at the sectoral and firm level for a large sample of European countries, additional information can be obtained for them regarding the sectors that have accounted for most revenues.

Privatizations occurred in all sectors and industries. However, the bulk of revenues came from telecommunications, utilities, manufacturing, and the finance and real estate industry. Generally, assets in the manufacturing and industrial sectors and financial institutions were sold in the earlier stages of privatization, whereas privatization in telecommunications, energy, transport, and utilities typically occurred in later stages.

Many privatization efforts took place in relatively short time windows. Transactions included in the high-earning episodes generated about 45 percent of total privatization proceeds in the EU25. In terms of volume, the highest number of transactions was in the manufacturing sector (26 percent), followed by the finance and real estate industry and utilities (at 18 percent each) (Figure A2.3). Most of the sales revenues, however, came from telecommunications sales, which generated the highest average transaction value and accounted for about one-third of proceeds since 1977.6

Figure A2.3.EU25: Composition of Privatization Transactions by Industry, 1977-2009

Sources: Privatization Barometer; and IMF staff calculations.

Table A2.1.Largest 5-Year Windows of Privatization Receipts
CountryWindow IRevenue

(% of GDP)
Window IIRevenue

(% of GDP)
Window IIIRevenue

(% of GDP)
Advanced economies
United Kingdom1987–19916.7
Transition economies
Czech Republic2001–200513.51995–19996.7
Macedonia, FYR1997–200113.02003–20076.7
Other economies
Cape Verde1995–199915.5
Sources: 2011 Privatization Barometer; and IMF staff calculations.Note: Transition economies at the time that the privatization episodes began.
Sources: 2011 Privatization Barometer; and IMF staff calculations.Note: Transition economies at the time that the privatization episodes began.

Privatizations of utility and financial companies generated a combined total of 40 percent of the proceeds. (The largest single transaction in the EU25 was France’s privatization of Gaz de France, generating US$21 billion.) Sales in the petroleum industry were important, contributing 13 percent of revenues.


Proceeds from privatization have been substantial in all parts of the world. Sizable revenues have been collected by several advanced economies within a limited number of years, and even larger amounts (as a share of national income) have accrued to transition, developing, and emerging economies. Of course, unless the act of privatization changes the value of the asset being sold, the sale involves only the exchange of one asset for another one of equal value, with no impact on the net worth of the public sector. Even in these circumstances, however, the swap of less liquid for more liquid assets (which could, in turn, be used to pay down the gross debt) can significantly reduce financial risks for the government. Implementation challenges include the need to ensure that the privatization process is transparent to avoid corruption and that the assets are sold at a fair price.

Because of data constraints, this appendix does not delve into estimation of the value of assets owned by the public sector for countries that may be considering privatization programs. However, detailed information is available from documents related to some individual countries. See, for example, Greece—Memorandum of Economic and Financial Policies, Annex III, Privatization Plan, July 13, 2011,

The World Bank data are drawn from various sources: OECD data on privatization in Africa, European Bank for Reconstruction and Development data on privatization in Europe and Central Asia, the Privatization Barometer ( for other select European countries, Latin Finance and Privatization International, the Private Participation in Infrastructure database, various government websites, and the World Bank’s own internal database. This increases the probability of data discrepancies, as different databases may have calculated the proceeds in different ways.

For eight countries covered by both data sources, the PB data are used. No comparable data are available for advanced economies outside the EU. In most cases the estimates are larger when drawn from the World Bank (gross receipts) rather than the PB (net receipts) data set. The PB and World Bank figures could differ from those produced by the national authorities.

Data on revenues are scaled on a transaction-by-transaction basis using country-specific GDP for the year in which the respective transaction occurred.

In Kazakhstan, 20 percent of GDP was generated by the privatization of one single asset in the oil industry.

The sectoral composition of the value of high-earning episodes in the EU25 is derived by first calculating the sector’s contribution (in percent) to the value of proceeds for each country, and then taking a simple average of the percentage values across countries.

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