Why the world bank successful privatisations are useful for the audit of privatisation
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Why the World Bank Successful Privatisations are Useful for the Audit of Privatisation? PowerPoint PPT Presentation


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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.

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

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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.


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.


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.


Borrower’s Implementation Capacity

  • Technical analysis for choosing entity to be privatised.

  • Negotiation skills.

  • Sale process experience.

  • Legal changes required.

  • Choosing relevant privatisation method.


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.


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


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:


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.


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.


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.


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.


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