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Bank lending for divestiture : a review of experience

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  • Kikeri,Sunita

Abstract

The objectives of this paper are to: (a) describe therationale for and key components of Bank support for divestiture; (b) examine the documented experiences and reform outcomes, and highlight the key implementation and management issues facing borrower governments and the Bank; and (c) draw some conclusions for the future role of the Bank in this reform area. After reviewing Bank support for divestiture, this paper concludes that divestiture operations are best tailored to country conditions. Sometimes divestiture yields minimal results. For example, small- and medium-sized public enterprises (PEs) may be divested, reducing the government's burden little; partial divestments may mean continued government interference; governments may assume liabilities higher than the sale price; or new investors may be given privileges and monopoly rights that produce more inefficiency. Sometimes the best policy may be to improve the environment in which PEs function. Ownership changes are only one element of broader PE reform, the implementation of which could create a better climate for divestiture later. The Bank could assist by spelling out the institutional set-up for managing divestiture.

Suggested Citation

  • Kikeri,Sunita, 1990. "Bank lending for divestiture : a review of experience," Policy Research Working Paper Series 338, The World Bank.
    • Handle: RePEc:wbk:wbrwps:338
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    References listed on IDEAS

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    1. Domberger, Simon & Piggott, John, 1986. "Privatization Policies and Public Enterprise: A Survey," The Economic Record, The Economic Society of Australia, vol. 62(177), pages 145-162, June.
    2. Heller, Peter S. & Schiller, Christian, 1989. "The fiscal impact of privatization, with some examples from Arab countries," World Development, Elsevier, vol. 17(5), pages 757-767, May.
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