Privatization: Keep the state out of business
Countries privatizing today have a huge advantage as a result of the experience gained during the past 15 years or so. "And those countries that don't get it right today simply haven't done enough to capitalize on this knowledge base," says Roger Leeds of the Johns Hopkins School for Advanced International Studies in Washington. So, what are the seminal lessons?
Get commitment at the top
Successful privatizers face entrenched opposition to reform. The president or prime minister is the only political figure powerful enough to manage the tensions resulting from such massive redistribution of wealth and power.
Set competition and regulatory policy before privatization
Creating competition is privatization's raison d'être. The rules should promote it. The Ivory Coast, as a former French colony, turned to France Telecom when it privatized its phone company. The French explained how much better it would be if they were given a monopoly. Competition, they suggested, is very disorderly and the government shouldn't want that kind of Anglo-American disruption to the economy. So, they turned a state monopoly into a private monopoly. Private monopolies, it turns out, are more efficient when it comes to exploiting market power than the government monopolies.