Privatization:  A Cure or a Risk? [Archives:1999/45/Business & Economy]

By: Ismail Al-Ghaberi
Yemen Times
Privatization
Since the early seventies “Privatization” reflected a new meaning in economic literature. Privatization refers to the process of transferring property from public to private ownership. Some see privatization as a set of policies that aim at setting market mechanisms, self-initiative and competition to work. All these will help in achieving development goals and social justice.
About one hundred countries have implemented privatization since the early seventies. The aim is to make domestic prices more consistent with international prices, thus encouraging the private sector.
A study on forty-seven developing countries by the International Development Association shows that the private sector is contributing more to the National Domestic Product. Its contribution increased from 12% in 1985 to 16% in 1991. Moreover, privatization and switching to market mechanisms resulted in fundamental changes in political and social structures.
With respect to developing countries that have private sectors, the matter is one of adjustment, including liberalizing more trade, tax system reform, getting rid of labor market rigidity and privatizing of public institutions. All these reforms have been accompanied by procedures to stabilize the economy, such as procedures to reduce government expenditure.
We Are with Privatization, However
Privatization as a new economic trend means that the government renounces all economic activities and gives the helm to some individuals who will take over through their organizations and establishments.
We don’t disapprove of privatization. However, we would like to draw people’s attention to the danger of transferring important centers in the country to individuals. If it is inevitable, we should have a prospective and long-sighted vision that makes us aware of our actions and our aims behind them. However, the point is how we can create a real harmony between all the active segments of the society and surmount the contradictions.
The privatization movement should be pursued by having a competent administration that is characterized by its ability to make proper, decisive decisions based upon the national interest. It should also be able to construct all opinions and consider disparity of opinion as a positive thing leading to facts. We have also to bear in mind that the new program of total privatization has given rise to many concepts and ideas, creating strong controversy among the people concerned.
The questions that crop up as a result of this new trend are the following:
How will the Private sector deal with the people, especially in the production and public services sectors?
Is there any other way to solve the problems of these centers without privatizing them?
How can the private sector take over despite the fact that it lacks the trust of the people?
All this has increased the people’s concerns. Some people are concerned because of some personal benefits, others are concerned because of their attempts to settle personal accounts. While some other people, the virtuous and decent people motivated by their loyalty, are concerned about the lower class who may be oppressed in these conditions. These people are very assertive that the policies adopted should have some goals that will help the development process.
One of the most important pillars that should be stressed is to have an overall evaluation process of the past. If we have transferred the national economy to a modern one that has a legislative prospect and that attracts, even on a small scale, investments, therefore we should keep momentum and follow the same policy. The shortcomings as well as the achievements that have been accomplished so far should also be pointed out. The question that may arise here is, “How to accomplish our goals?”To find an answer to this question, we should consider and view the beginning steps of production, for when we started manufacturing we started doing that without a prospective, clear and effective policy. We have never tried to get rid of the obstacles we faced; idleness of workers and the sense of irresponsibility of the people in charge. All this happened beside the traditional ways of doing things, the greediness to buy lands and the desire to earn without exerting much effort.
We should focus on the specialization and duties along with enhancing the respect of time and raising the people’s awareness to have better concepts which will make them fully conscious of everything taking place around them. There should also be a balance between modern economic organization and holding a good technological position.
The comparison becomes so difficult, if we keep in mind that we in Yemen have started from scratch. Our start was to establish a strong economic basis for the development and to enhance and strengthen the infrastructure in terms of improving the public services. It is so because there can never be any real development in any field if it is based upon a fragile stand. Besides these development programs should not be looked upon as a mere economic process, for the social aspects should be there and should be comprehensive for whatever is done, is done for the welfare of the people.
As I mentioned earlier, no-one opposes the principle of privatization itself. However , what is being carried out is a legitimate ambition of some people to guarantee its success and insure that there will be no adverse reactions. Hereby I present my humble vision of this field:
1) Defining the government trend in the future in regard to investment in general and privatization in particular to evaluate everything that has taken place in the past. All the facilities rendered should also be evaluated. We should also make sure whether these facilities have been used properly or were exploited for personal interests.
2) If some projects are for sale, workers should be given a percentage of the shares sold. Besides, there should be a balanced ratio for signing contracts as a sure sign to take care of the social dimension of the investment and development process.
3) Checking the establishments’ conditions and helping some of them to improve their production to achieve self-dependence before they are sold. The people in charge should administer these establishments in a balanced economic technique that relieves some tensions on the budget of the government. They should also take measures to decrease debts of some of these establishments.
4) There should also be a strong determination to use all the revenues of privatization to support the budget of the government.
5) Applying transparency in propagating these establishments for sale and making the people aware that privatization is a positive step to get rid of the old heritage that put everything on the shoulders of government.
6) Devoting the social as well as human dimensions to face the obstacles that may result from the privatization and sponsoring the affective side.
7) Paying due attention to the evaluation and studying the resulting phenomena that arise due to the transfer of control in a way that will maintain the development process.
The Political Dimension
The aforementioned is a humble vision of the privatization process in case it is a serious and prospective step. However, if it is a way of strengthening the government’s grip on the elements of power in a way to decompose the social wealth, eliminating the existence of the public services as a sacred duty of the government, this will weaken the framework of the government, weakening the social structure and limiting accountability. Thus, due to the transfer of control from the government to some specific individuals, the ties of trust will be damaged beyond repair.
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