Why the World Bank Successful Privatisations are Useful for the Audit of Privatisation?

1. Why the World Bank Successful Privatisations are Useful for the Audit of Privatisation? • The World Bank rich experience worldwide through providing technical and financial assistance for: • Restructuring. • Developing the institutional framework for privatisation. • Evaluation. • Marketing to potential bidders. • The SAI may be involved in a pre-sale aspects as stated in the Guideline “3” such as: • Advice the state-owned company on the financial state of the business. • Providing certificates on specific financial issues that can be cited in the sale documentation.

2. The World Bank’s staff and consultants recorded successful privatisation in countries. • Political commitment to privatisation. • Administrative capacity to implement. • Well developed private sector. • Regulations that encourage competitions. • Maintaining transparency. • Relevant pre-sale restructuring. • Social implications of privatisations. • Sell on cash basis. • Repaid and Large-scale privatisations or institutional building capacity.

3. Strong Political Support to the Privatisation Programme Experience showed that the commitment by the most influential government members has a vital role for successful. • Current beneficiaries from sate-owned companies are well organised in forms of trade unions and other association whereas potential beneficiaries are not. • Measuring political commitment involves: • Key government leaders and officials commitment to privatisation. • Width and broadness of privatisation programme. • Borrower’s express commitment well ahead of seeking World Bank assistance. • Amount of resources that the government of the borrower is committed to allocate out of its own resources.

4. Borrower’s Implementation Capacity • Technical analysis for choosing entity to be privatised. • Negotiation skills. • Sale process experience. • Legal changes required. • Choosing relevant privatisation method.

5. Well Developed Private Sector • Developing private sector first than privatise to avoid the risk of giving buyers the advantage of protecting them from competition . Developed private sector lead to sustainable privatisation and not the number of entities privatised or the amount of their proceeds • Removing monopoly power is much better than receiving much higher sales price by divesting into protected markets.

6. Regulations That Promote Competition • Well developed regulator frame work that encourage competition and discourage monopoly (Chile Telecom) • Regulation may give the borrower direct control over monopoly or through a public body

7. Maintaining Transparency at All Stage of the Privatisation Process Serious investor will be discouraged if there were doubts at any stage of the privatisation process. • Adopting competitive bidding process. • Developing criteria for evaluating the bidders: • Attribute different weighting to different criteria consistently. • Communicating information equally to potential bidders. • Criteria relevance appropriateness to the stage of the sale. • Developing criteria for selection of bidders:

8. Some Basic Pre-Sale Restructuring • Basic restructuring some times are necessary and may enhance the value of the company to be privatised . This may include: • Legal, clearing legal title on asset. • Financial. • Organisational • Restructuring that requires large amounts of public resources plant modernisation and equipment should be left to the potential investor • Successful privatisation of large companies usually involves considerable preparation such as: • Breakdown into competitive and marketable units. • bringing in highly active private sector managers. • Setting outstanding liabilities. • Shedding excess labour.

9. Handling Social Implications of Privatisation There is no best way to deal with social aspects associated with divesting state-owned companies. However, the following practices were used by many borrowers: • Severance packages and training. • Arrangements for redeployment employee ownership schemes. • unemployment benefits. • Seed capital for workers.

10. Sell on Cash Basis The World Bank experience strongly recommends the selling of state-owned company to be on cash as credit sale in many cases proved to be no more than turns state equity investment in a private sector firm. Even in cases of financial difficulties and insolvent companies the World Bank recommends the bankruptcy as the model.

11. Rapid and Large-Scale Privatisation or Institutional Building Capacity • Rapid and Large-Scale privatisation can be adopted in countries with developed markets, implementation capabilities and developed private sector. Borrowers that adopted large-scale in the absence of such favourable market conditions showed the following: • did not give due care to procedures for selling. • Failed to select the right buyers. • Failed to issue regulations that discourage monopoly. • Failed to carry out necessary and simple restructuring. • Weak government's bargaining advantage with buyers as result of exposing too many assets up for sale at once in a short period of time.