Selected Principles, Elements and Experiences of Privatisation in Germany

In most states with market oriented economic systems privatisation plays an important role in the political discussion, mainly due to the fundamental problem of all economic systems, which is scarcity of available resources. The responsible politicians try to improve the allocation of scarce resources and to increase the financial possibilities for needed development investments by creating an adequate macroeconomic framework and a business-friendly environment. Within the scope of these efforts the production of goods and commercial services by state-owned enterprises only plays a very limited role. The state would be best advised to leave these functions to the, in this regard, more efficient private sector. The public sector should concentrate its respective efforts only on the production of so-called Public Goods and, for political reasons, eventually on some sub-sectors, which are essential for the security of the country. Nearly all market economies and especially states which are in the transitional process from more centrally administered to market oriented economic systems, have room for manoeuvre towards privatisation of state-owned enterprises. Privatisation facilitate the improvement of factor allocation and the reduction of budget constraints, not only by the way of sales revenues but also by creating a broader tax-base, decreasing the need to provide subsidies and, last but not least, mobilising private resources for the aimed development-process. This is also true for the Republic of India as well as for the Federal Republic of Germany. However, privatisation causes not only advantages for the economic systems and the public budgets, but also some economic and financial costs. These costs have to be reduced as much as possible by an efficient target-oriented policy. Although the corresponding policies and experiences in one country can hardly be a blueprint for another country, a policy-dialogue at various levels about privatisation and on the underlying legal and economic frameworks is helpful for all involved parties. The exchange of experiences can also contribute to the avoidance of disappointments and setbacks that could jeopardise the privatisation policy introduced. Relating to the above the Government of India noticed: "Thus, while one would do well to learn from the successful experience, one would have to be careful of the pitfalls as well. In the final analysis, while experience of other countries is available by the way of guidance, one would have to evolve one's own techniques, best suited to the level of development of the country. ... The historic, cultural and institutional context influences the way in which and the pace at which privatisation is implemented" (Ministry of Disinvestment 2003, p.1). Experience sharing between experts of different countries is an appropriate way of learning from each other and avoiding the disadvantages of blue prints at the same time. On initiative of the Ministers of Finance of the Republic of India and the Federal Republic of Germany, both governments agreed, therefore, to enhance the exchange of experiences about disinvestment/privatisation in the framework of economic cooperation. The Ministry of Disinvestment (since June 2004: Department of Disinvestment in the Ministry of Finance) and the Bundesministerium fuer wirtschaftliche Zusammenarbeit und Entwicklung, BMZ, (Federal Ministry for Economic Cooperation and Development) are the responsible authorities. The German contributions will be provided by the Deutsche Gesellschaft fuer Technische Zusammenarbeit, GTZ, (German Agency for Technical Cooperation) on behalf of BMZ. This Report gives an overview of selected principles, elements and experiences of privatisation in Germany, with special reference to the new Federal States in East Germany and under consideration of selected aspects in neighbouring countries. The intention is not to present a complete abstract, but to provide a discussion basis for identifying starting points for a future dialogue about lessons learnt. This paper was elaborated by the Hamburg Institute of International Economics (HWWA) at the instigation of Sanjeev S. Ahluwalia, IAS, (Department of Disinvestment) and Dr. Dietrich Kebschull (GTZ). The author would like to express his sincere thanks to both of them as well as to Gunnar Geyer, Carsten Hefeker, Britta Jens and to Rasul Shams (all HWWA) for their valuable suggestions.