Privatization and development: Some Lessons from Experience

Transcription

1 Privatization and development: Some Lessons from Experience François Bourguignon Sr. Vice President and Chief Economist The World Bank ABCDE, Bled, Slovenia May 17-18,

2 Widespread dissatisfaction with privatization in Latin America N egative Views of Privatization in Latin America, 1998 and 2005 Peru N icaragua Mexico Chile Brazil B o livia Argentina % of respondents who disagree that privatization has been beneficial for the country Source: Latinobarómetro 2

3 Outline 1. Trends in Privatization in Developing Countries 2. The Simple Economics of Privatization 3. Empirical Evidence 4. Concluding Remarks 3

4 1. Trends in Privatization in Developing and Transition Countries 4

5 Privatization advanced rapidly in the 1990s Privatization Proceeds and Deals: Developing Countries, Total Proceeds (US$ billion) Total Number of Deals Total Proceeds: Developing countries Total Proceeds: Developing countries excluding Europe and Central Asia Total Number of Deals: Developing countries Total Number of Deals: Developing countries excluding Europe and Central Asia Source: World Bank Privatization Database and WDI

6 with Latin America leading the privatization wave and Europe and Central Asia taking over after 2000 Privatization Proceeds (as % GDP) Mexico: 3.6% Nicaragua: 2.1% Venezuela: 4.4% Brazil: 4.1% El Salvador: 7.5% Guatemala: 6.3% Latin America & Caribbean East Asia & Pacific Source: World Bank Privatization Database and WDI Europe & Central Asia 6

7 Cumulated Importance and Sectoral Composition of Privatization differ widely across regions Accumulated Proceeds by Sectors, Total Proceeds as % of 2000 GDP % 11% 5% 5% Mining/Other Manufacturing/Services Energy Financial Infrastructure 4% 4% 0.00 Europe & Central Asia Latin America & Caribbean Source: World Bank Privatization Database and WDI East Asia & Pacific Middle East & North Africa Sub-Saharan Africa South Asia 7

8 Extent of privatization must be measured against the size of the public sector Privatization Proceeds and the Role of State-Owned Enterprises (SOEs) Percentage Argentina 1990 China 1997 Côte d'ivoire 1991 India 1993 Mexico 1995 Turkey 1997 Source: WDI 2000 Accumulated Proceeds / GDP2000 SOEs Economic Activity (% of GDP) SOEs Investment (% of GDI) 8

9 2. The Simple Economics of Privatization 9

10 Efficiency and Equity Effects of Privatization: a simple stylized example Subsidized SOE Price 80 Quantity 85 Rationing 7 Employment Wage 10 Public Subsidy (incl. Fixed Costs ) Consumer Cost 6800 Private Monopoly (Universal service, cap price, no subsidy) Price (set) 120 Quantity 88 Rationing 0 Employment 880 Wage 10 Public Subsidy 0 Consumer Cost (SOE quantity) Efficiency Gains (SOE as reference) Production 3 Employment Distributional effects (in, SOE as reference) Taxpayers 4825 Consumers ("Access" +240) Employees Business owners 760 Total

11 3. Empirical Evidence 11

12 Conceptual and Methodological Issues Two criteria can be used to evaluate privatization: Efficiency Distributional Impact How to combine them? Empirical identification of the impact of privatization : Before and after Using a counterfactual (or a benchmark) 12

13 Efficiency Outcomes Mexican Privatization of Non-Financial Firms Efficiency Performance in Competitive and Non Competitive Industries (change in the median before and after privatization) All Industry Competitive Industry Non Competitive Industry Percentage Sales per Employee Employment Sales Prices Source: La Porta and López de Silanes (1999) 13

14 Efficiency Outcomes: Relationship between privatization and type of ownership in Transition Economies 15 The Impact of Ownership on Performance : Czech Republic, Hungary, and Poland (Fixed effects for firms, SOE as reference) 10 Percentag Revenue Employment Productivity Firms Privatized,Owned by Outsiders Firms Privatized, Owned by Insiders Note: The fixed effects coefficients are estimated controlling by year and country. The coefficients for privatization owned by outsiders are statistically significant at 1 percent for revenue and productivity. Source: Frydman, Gray, Hessel, and Rapaczynski (1999) 14

15 Efficiency Outcomes: Water Utilities in Africa 70 Percentage of State and Private Water Utlities in Africa ranked by Relative Efficiency using Data Envelopment Analysis, State Private % Rel. Efficiency % Rel. Efficiency % Rel. Ef f iciency % Rel. Efficiency < 70 % Rel. Efficiency Source: Kirkpatrick, Parker, and Zhang (2006) 15

16 Distributional Impact: 1997 Privatization of Water Distribution in La Paz and El Alto (Bolivia) Evolution of Water Prices in Bolivia Real Price Index 1994= Jan Survey La Paz and El Alto Privatization 1999 Survey Cochabamba Privatization La Paz/El Alto Cochabamba Source: Barja, McKenzie, and Urquiola (2005) 16

17 Welfare Changes (by decile) due to the 1997 Privatization 25 Welfare Changes from Water Privatization (as % of per capita 1994 household expenditure) Households with access (both periods) Households who gain access All Households 1994 Poorest Decile Decile 5 Richest Decile Source: Barja, McKenzie, and Urquiola (2005) 17

18 Distributional Impact: The Water War Cochabamba (Bolivia), 1999 Welfare Changes from Water Privatization : Cochabamba (as % of per capita 1999 household expenditure) Richest Decile Poorest Decile Decile 5 Source: Barja, McKenzie, and Urquiola (2005) 18

19 Distributional Impact: Argentina Child Mortality Rates Source: Galiani, Gertler, and Schargrodsky (2005) 19

20 4. Concluding Remarks Paucity of full evaluations in developing countries Efficiency gain of privatization seems warranted: productivity and output gain with (not always) employment loss. Uncertainty on distributional effects; opacity and the negative perception of privatizations. Little doubt on overall gain for 'competitive' privatizations. More to be done on ex-ante/ex-post impact evaluation, regulation, and losers' compensation in other cases 20

21 END 21

22 1. Motivation 22

23 Privatization advanced rapidly in the 1990s Privatization Proceeds and Deals: Developing Countries, Total Proceeds (US$ billion) Average Deal US$52 mil US$179 ml US$112 mil US$295 mil Total Number of Deals Total Proceeds: Developing countries Total Proceeds: Developing countries excluding Europe and Central Asia Total Number of Deals: Developing countries Total Number of Deals: Developing countries excluding Europe and Central Asia Source: World Bank Privatization Database and WDI

24 with Latin America leading the privatization wave and Europe and Central Asia taking over after 2000 Privatization Proceeds (as % GDP) BANMEX Deal: 1% of Mexico 1991 GDP Telesp Deal: 0.6% of Brazil 1998 GDP Latin America & Caribbean East Asia & Pacific Source: World Bank Privatization Database and WDI Europe & Central Asia 24

25 Efficiency and Equity Effects of Privatization: a simple stylized example Subsidized State-Owned Enterprise (SOE) Price (set) 80 Wage 10 Quantity 85 Q demand 92 E (employees) Subsidy (incl. Fixed Costs) 4825 Consumer Cost

26 Summary Results: SOE vis-à-vis Private and Optimally Regulated Monopolies Private Monopoly (cap price, no subsidy) Efficiency Gains (SOE as reference) Optimally Regulated Monopoly Efficiency Gains (SOE as reference) q 3 E q 5 E Change of Income (in, SOE as reference) Distribution of Income (in, SOE as reference) Taxpayers 4825 Consumers Employees Business 760 Total 360 Taxpayers 3825 Consumers Employees Business 0 Total

27 Mexican Privatization of Non-Financial Firms Defining the counterfactual Industry Adjusted and Non Adjusted Changes in Efficiency (change in the median before and after privatization) Percentage Sales per Employee Sales Prices Change in the Median Change in the Median (Industry Adjusted) Source: La Porta and López de Silanes (1999) 27

28 Efficiency and Equity Effects of Privatization: Optimal Regulation or Competitive Unbundling Subsidized SOE Price 80 Quantity 85 Rationing 7 Employment Wage 10 Public Subsidy (incl. Fixed Costs ) Consumer Cost 6800 Optimally Regulated Monopoly (or competitive unbundling) Price (set) 100 Quantity 90 Rationing 0 Employment 900 Wage 10 Public Subsidy (Fixed cost) 1000 Consumer Cost 9000 (SOE quantity) 8500 Efficiency Gains (SOE as reference) Production 5 Employment Distributional effects (in, SOE as reference) Taxpayers 3825 Consumers ("Access" +400) Employees Business owners 0 Total

29 Efficiency and Equity Effects of Privatization: a simple stylized example Subsidized SOE Price 80 Quantity 85 Rationing 7 Employment Wage 10 Public Subsidy (incl. Fixed Costs ) Consumer Cost 6800 Private Monopoly (Universal service, cap price, no subsidy) Price 120 Quantity 88 Rationing 0 Employment 880 Wage 10 Public Subsidy 0 Consumer Cost (SOE quantity) Efficiency Gains (SOE as reference) Production 3 Employment Distributional effects (in, SOE as reference) Taxpayers 4825 Consumers ("Access" +240) Employees Business owners 760 Total

30 The Importance of Privatization in Developing Countries Privatization Proceeds in Developing Countries, US$ billio Source: World Bank Privatization Database 30

31 SOE vis-à-vis Optimally Regulated Monopoly (or "unbundling" with full competition) Subsidized SOE Price (set) 80 Wage 10 Quantity 85 Q demand 92 E (employees) Subsidy (incl. Fixed Costs) 4825 Consumer Cost 6800 Optimally Regulated Monopoly or competitive privatization Price 100 Wage 10 Quantity 90 Q demand 90 E (employees) 900 Subsidy (Fixed Costs) 1000 Consumer Cost 9000 SOE quantity 8500 Efficiency Gains (SOE as reference) Q 5 E Change of Income (in, SOE as reference) Taxpayers 3825 Consumers Employees Business 0 Total