The impact of privatization in developing countries

By Isaac Twumasi Quantus in Accra.

Privatization is a process that governments in both developed and developing countries have been undertaking for well over a quarter century, and yet, the effects of privatization in developing countries have not been well documented. Typically, it is from an economic perspective that privatization has been studied.
In developed countries, in which the role of government vis-à-vis the role of the private business sector and civil society is often fairly well established, this may be appropriate.

However, in developing countries, privatization frequently is implemented in a situation in which the economic, social, and political systems are evolving simultaneously. It is widely agreed that as a region, sub Saharan Africa is most underdeveloped of any region in the world, whether measured conventional economic terms or in terms of human welfare such as educational attainment or measures of health.

Further, most analyst agree that prospects do not hold much promise that the situation will change dramatically in the near future. The vast majority of countries in sub Saharan Africa have high levels of external debts both in relation to their annual gross domestic products and export, a limited industry base, and underdeveloped infrastructure networks that constrain the ability of these countries to launch a major economic revival.

Further, a number of social conditions limit the ability of countries in sub Saharan Africa from making tangible development: these conditions include high birth rates, a relatively young population with limited education and serious health issues including endemic diseases such as malaria and high levels of HIV/AIDS.

This grim situation and forecast came at a time when world political, economic and social conditions are rapidly transforming as globalization continue to envelop every region of the world.
Yet, sub Saharan Africa in general, remained outside of many changes that are taking place throughout the world, as an example sub Saharan Africa with just 10 percent of the world’s population, presently accounts for less than two percent of international trade.

In terms of economic development, the international development community, for the most parts, has pinned the hopes of much of the developing world, including countries in sub Saharan Africa, on enhancing market-oriented economies with a framework of relative free trade. This ideally, will engender sustained economic development that generates enough economic output and wealth to allow countries to provide social services to a greater number of their citizens and foster greater participation in political processes.

This approach to development is based on a economic system in which the private business sector is able to function relatively free of government intervention, while the state focuses on the facilitation of private sector economic growth and providing social services such as education and healthcare to the populace.
This development approach has become the main theoretical paradigm in the international development community and has since been the focus of development policies particularly for the international finance institutions such as the International Monetary fund and the World Bank which often have powerful influence on policies pursued in many less developed countries.

Although privatization may improve economic efficiency in the enterprises that are divested into the private sector an important claim of advocates of privatization. In particular, it is asserted that in situation where the vast majority of a population lives outside the formal economy there will likely be limited improvement in the living standards of most people and any efficiency gains that may occur through privatization will not trickle to the vast majority of the population.

 

This article was originally posted on Sustainable Development Africa Platform

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