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Keith Jefferis
Comments on: “Privatisation – Cross Country Experiences”
September 17, 2009
Structure of Presentation
• Introduction
• Comments on Dr Steytler’s Paper
• Elaboration of Privatisation issues in the banking sector in Africa
Introduction
• Privatisation now well established on the policy agenda – and plenty of evidence against which to evaluate experiences
• To what extent has global financial and economic crisis changed the environment for privatisation?
Comments on the paper• Comprehensive review of global privatisation
developments• Good use of WB privatisation database
– Privatisation alive and well
– Maybe a pause due to global crisis
• Useful summary of privatisation impact – In general, positive macro, micro and welfare impacts
• No major disagreements – a few suggestions for improvement or follow-up
Presentation of data
• More analysis and comparison of regional trends in WB database
• Presentation of annual regional totals by both value and number
• Use graphs – for example
• Is the slowdown in privatisation during the crisis temporary or more permanent?
• Is the stock of SOEs slated for privatisation becoming exhausted?
• Is the form of privatisation changing?
Future Privatisation Prospects
• Despite successes, privatisation remains a controversial topic – why?– Fragmentation of beneficiaries
– Impact of failures – used to attack principles rather than design of specific privatisations
• Perhaps a need to examine the anti-privatisation literature more thoroughly
• Could lead to more detailed consideration of conditions necessary for privatisation to succeed
Opposition to Privatisation
Banking Privatisation in Africa
• Extensive state-owned banks in Africa– Typically inefficient, loss making, high NPLs, poor service,
frequent recapitalisation, obliged to finance loss-making SOEs
– Associated with highly regulated financial sectors
• Banking privatisation part of broader financial reform process– Removal of direct controls– Market based monetary policy– Withdrawal of state from direct ownership– Encouragement of FDI in financial sector
• Mixed experiences; best when:– Govts fully relinquish control and preferably fully divest
shareholding– No post-privatisation restrictions– Privatisation to strategic investors rather than IPOs– Open bidding, including foreign investors– High level of competition in banking– High quality banking regulation
• Can lead to major micro and macro gains, but may be conflict between political and economic objectives
Banking Privatisation - Results
• Banking sector crisis in developed economies – major extension of state ownership
• Negative attitudes towards banks• Is this the case in Africa?• Has privatisation been affected?
Impact of Global Crisis?
• 3 questions addressed:– Is there a backlash against financial sector reform and
liberalisation?– Is privatisation being affected?– Are govts considering a greater direct role in
ownership of banks?
Results of Central Bank Survey
• No evidence for backlash• In general, benefits of financial reform are
evident and appreciated• Reform is entrenched and continuing – no
suggestion of reversal
Backlash against reform?
• No significant impact• Benefits of privatisation appreciated by public:
– Improved efficiency, profitability, range of products and services
– Privatised banks superior to old state-owned banks– Boosted by entry of foreign banks
• Banks in Africa have avoided problems of toxic assets, major losses, bankruptcies – no calls/need for government intervention
• Privatisation ongoing
Negative impact on Privatisation?
• No evidence of increased govt ownership role (except Nigeria!)
• No real need for intervention or recapitalisation• Understanding that proper role for governments
in financial sector is regulation and development• Focus is on reviewing/updating regulatory
structures
Greater state ownership role?
• Banking privatisation likely to continue, but– Most govt. owned commercial banks now privatised– Future privatisations may be more difficult (e.g.
development banks)– Renewed focus on regulatory quality
Future Prospects
• Review of banking privatisation in Africa confirms Dr Steytler’s more general conclusions– Can lead to significant micro and macroeconomic
gains, but no guarantee of success
– Privatisation must learn from earlier experiences
– Should be tailored to local conditions
– Must be accompanied by competition and appropriate regulation
– Transparency should be enforced, with open and competitive bidding
Conclusions
Thank You