Privatization in Developing Countries: A Summary Assessment

In the last 25 years many thousands of formerly state-owned firms have been privatized in transition economies, generating over U.S. $400 billion in sales proceeds. In addition, thousands of firms have been privatized by methods in which no money was raised. The vast majority of economic studies praise privatization's positive impact at the level of the firm, as well as its positive macroeconomic and welfare contributions. Even so, public opinion in the developing world is quite hostile to privatization. The process has proven harder to launch, and more likely to produce errant results in institutionally weak states. A successful privatization process requires mechanisms that give private investors incentives and comfort, that create and sustain the policies and regulatory institutions that make governments competent and honest partners with private partners, and that protect consumers, particularly the most disadvantaged, from abuse.