Maximizing Charitable Endowments in Developing Regions through Privatization

1. PHILANTHROPICATION thru PRIVATIZATION: A New Approach to Building Charitable Endowments in Developing Regions LESTER M. SALAMON Johns Hopkins University and East-West Management Institute

2. BACKGROUND • Major efforts under way to foster community foundations in less developed areas • These efforts are hampered by lack of capital • Growing frustration the result

3. Meanwhile, enormous privatization sales going forward in same countries Meanwhile, enormous privatization sales going forward in same countries • Hungarian mortgage bank FHB (2007) • Ukraine’s Kryvorishstal Steel Mill (2005) • Kenya Generating Company (2008) • Turkey’s power grid (2006-2008) • Kenya telephone grid sold to Vodaphone in 2008 • 2005-09: $545+ billion of privatization sales

4. Country Pending Sales 27 Turkey Pakistan 61 Rwanda 10 Georgia 249 Shenyang Province, China 24 Kosovo 40-50 Kenya 26 PRIVATIZATION STILL UNDERWAY PENDING TRANSACTIONS

5. PENDING PRIVATIZATIONS: KENYA • Kenya Pipeline Co. • Kenya Ports Authority—Eldoret Container Terminal • Chemelli Sugar Co. • South Nyanza Sugar Co. • Kabarnet Hotel • Mt. Elgon Lodge Ltd • Kenya Safari Lodges and Hotels • Agrochemical and Food Corporation • Kenya Wine Agencies • East African Portland Cement • New Kenya Co-operative Creameries • Various power stations

6. THE OPPORTUNITY • Capturing a fraction of the privatization proceeds for community foundations could revolutionize the foundation landscape of the world • 10% of proceeds of Kryvoriszhstal Steel in Ukraine could have yielded a $480 million Ukrainian community foundation • 10% of proceeds of Kenya-Vodaphone deal would have yielded a $70 million Kenya community foundation

7. Not Just a Theoretical Idea • Italian banking foundations • Blue Cross/Blue Shield Sales in US • New Zealand Community Trusts • Volkswagen Foundation • Czech Foundation Investment Fund • 415 verified cases so far

8. THE PROBLEM • Little systematic information • No cross-fertilization of experience • No assembly of best practices • Limited analysis of lessons • No effort to seize the opportunity to build on the experience in other places

9. An Opportune Moment Defuse opposition to privatization • CEE Survey • Citizen protests Ukraine/China • Sales halted in: Sweden, Germany, France, Italy • Sarkozy dedication of 2007 sale to universities

10. PtP PROJECT • Build the case for PtP by documenting prior cases • Identify best practices/useful lessons • Disseminate materials/increase awareness • Promote implementation

11. TWO-TRACK APPROACH Track I: Building the Case • Identify past cases of PtP • Analyze cases, identify best practices • Disseminate results Track II: Implementation Assistance— 3-4 sites

12. 3 Defining Features • A public or quasi-public asset • A resulting privately controlled charitable endowment • A process of transformation

13. 5 TYPES Depends on Initial asset State-owned enterprise Other state-owned asset Government lottery Debt swap Quasi-governmental organization (e.g. nonprofit)

14. NEXT STEPS • Conduct case studies • Form advisory committee • Develop “best practice” guidelines • Disseminate results–conferences/PtP website • Identify pilot test countries • Launch pilot implementations • Chronicle pilot implementation progress/lessons • Publicize & promote further implementation

15. THE TIME IS RIPE • Increased interest in global philanthropy • Increased resistance to privatization • Business community looking for win-win opportunities • Institutional structure for community foundations in place in many locales Let’s seize the moment!

16. For further information CONTACT Lester M. Salamon lsalamon@jhu.edu

17. PRIVATIZATION STILL UNDERWAY DEVELOPING COUNTRIES Proceeds by region, 2005-2008 Source: World Bank Group

18. PRIVATIZATION STILL UNDERWAY OECD COUNTRIES Proceeds by year, 2006-2009 Source: Privatization Barometer