Presentation on theme: "1 Why the World Bank Successful Privatisations are Useful for the Audit of Privatisation? The World Bank rich experience worldwide through providing technical."— Presentation transcript:
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 Banks 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. Borrowers 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 Borrowers 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.