The Evolution of Privatization in Turkey: The Institutional Context of Public-Enterprise Reform

This chapter presents a political economic analysis of the privatization movement in Turkey. In terms of pace and volume, the privatization experience in Turkey can be examined in two different periods. In the period 1985–2003, privatization amounted to only 8.2 billion dollar, while it reached approximately 36.4 billion dollar in the period 2004–2009. The radical transformation in the privatization policies of Turkey is worth analyzing from a political economy perspective. To this purpose, first, the historical background to privatization in Turkey and the circumstances leading to liberalization and privatization policies will be examined. Second, the factors influencing the privatization process such as objectives, strategies, and the effects of economic, legal, institutional, and political conditions will be discussed. Analysis of the privatization experience in Turkey reveals that factors such as legal and institutional structures, political will, unstable macroeconomic conditions, ideological resistance, and rent seeking activities shaped the privatization movement and its consequences.

Introduction Japan implemented a far-reaching privatization policy of public enterprises in the mid-1980s. Nippon Telegraph and Telephone Public Corporation (NTTPC) was privatized in 1985 and Japan National Railways (JNR) was reorganized as a private company in 1987. Since these public enterprises provide the basic infrastructure for economic and social development, privatization of these giant public entities symbolizes a drastic alteration in the traditional thinking of how to deal with monopolies. The Japanese experiment of privatization is an acid test to determine whether these public services could be supplied efficiently by private organizations. The Japanese privatization policy indicates that privatization is essentially a political issue. Since privatization and deregulation may destroy the vested interests, how to create a favourable political climate for change and who takes the initiatives are the key elements which ensure that the difficult regulatory reforms proceed smoothly. Japan's privatization policy has not been successful in all respects. Many unresolved questions remain. Moreover, Japan's privatization policy reflects the peculiar economic and social characteristics of the Japanese traditional setting. Japan's experience could not be directly transferable to other countries because of the differences in the development stage and traditional economic system. However, it is also true that there are various economic rationales behind the Japanese privatization policy that are common in any economy. Although Japan's privatization has not been completed, the experience of privatizing Japanese public enterprises could provide many interesting lessons to Vietnam in its attempt to reform its state-owned enterprises (SOEs). This chapter is organized as follows. Section II explains the major reasons why Japan's public enterprises were privatized. The next sections focus on two case studies of Japan's privatization policy. Section III examines a case study of NTTPC — it discusses the main characteristics of the NTTPC privatization policy and assesses the results of privatization. Section IV considers a case study of JNR — it discusses the major features of JNR privatization practices and evaluates the economic effects on its performance after privatization. Section V outlines some of the political and economic implications of the Japanese experience and applicability for Vietnam.

Privatisation, or denationalisation as it was once called, has been central to Thatcherism. The rolling back of the Socialist state and encouragement of the free-market are encapsulated in the privatisation programme. The increased size of the private sector in relation to the public sector seemed a distant dream for most Conservatives before 1979 — according to the socialist ratchet argument of Sir Keith Joseph1 — and therefore the extent of privatisation, according to Thatcherite ideology, has been a triumph. No less than 40 per cent of the industries nationalised in 1945–79 have been privatised. At the same time, bus and coach routes have been de-regulated, contracting out to private tender has become a feature of Conservative-run local government, private pensions, health care and education have flourished and professional restrictive practices, such as the solicitors’ conveyancing monopoly, have been eroded. Six freeports have been established and enterprise zones expanded. Over 1 million council houses have been sold to tenants. This process, as John Biffen has remarked with some irony, is a permanent and fundamental transfer of wealth and power in favour of the private sector. Individual share owners stood at 2 million in 1979 and had subsequently grown to 9.2 million by 1987, for the first time outnumbering trade unionists, many of whom had bought shares in privatised companies.

Privatization not only results in the transfer of state assets, but it also reduces economic role of the government. Developing and developed countries have experienced privatization in different ways for years. This article focuses upon the issue of privatization in Turkey. Turkey launched its comprehensive economic liberalization program named ‘structural adjustment reform' in 1980 by the stimulation of the World Bank and IMF. Later on, privatization has been an official state ideology with two institutions, the Privatization Higher Council and the Privatization Administration. Some of their implementations have been given. Privatization policies have multiple, often together with often inter-related and conflicting political, economic and financial objectives. They must be evaluated according to political, social and economical structures and conditions of the country concerned. Together with privatization, competition and its institutional framework with implementations have also been analyzed in the paper. The paper maintains that there seemed no direct and strong relationship between the privatization endeavours and institutional competition. Finally, the study points out that Turkey seems to be a bare-foot runner in its privatization venture unless there is a proper competitive market, together with a sound social security system and a profound capital market.

This paper explores the optimal environmental tax and level of privatization in an international duopolistic market. We show that when the government is able to control the environmental tax and the extent of privatization, the optimal environmental tax is lower than the standard Pigouvian level. We also show that the optimal level of privatization of state-owned enterprises is partial privatization. Further, the optimal level of privatization is inversely dependent on the cleanup cost of past environmental contamination.

Education market advocates frequently argue that socioeconomically disadvantaged students could be the main beneficiaries of privatization and market policies. However, the international evidence has shown how privatization and pro-market policies have a negative impact in terms of equity, which particularly affect socioeconomically disadvantaged populations, increase school segregation and stratification, and foster educational inequalities. The main objective of this paper is to analyze how the responses developed by educational providers in marketized environments especially impact poor populations and can act as mechanisms of exclusion. In this context, Chile is an optimal case study due to the extreme version of privatization and market policies it adopted four decades ago. Based on the case study of two municipalities in Chile, which represent two local education markets, the presented evidence combines in-depth interviews with school principals and families. The paper analyses how schools’ responses in the context of a competitive environment produce, among other effects, processes of exclusion affecting students from low socioeconomic backgrounds, foster school segregation and increase educational inequalities. Finally, the paper elaborates on the limits of education markets and privatization policies, as well as market regulation reforms, in providing better educational opportunities to socioeconomically disadvantaged students.

Privatization of Public Enterprises in Bangladesh: Problems and Prospects

PurposeState-owned enterprises (SOEs) are essential tools to further policy objectives across the world. However, in the past few decades, heated debates on the performance of SOEs vis-à-vis private sector enterprises have surfaced. In India, SOEs have long played an important role in the economy and only recently have undergone the trend of privatization. The purpose of this paper is to analyze existing research and to conclude whether private enterprises perform better than SOEs.Design/methodology/approachA review of available literature on performance comparisons of public and private sector enterprises is carried out, and differences between public and private enterprises are studied. Finally, theoretical propositions on the differences in objectives of public and private enterprises in the Indian context are enumerated. Three propositions are tested using data on Indian SOEs available in the public domain.FindingsPerformance comparisons of public and private enterprises have focused merely on technical productivity or financial aspects and have thus left out the wide scope of social, economic and political objectives of SOEs. Literature on the nature of SOEs indicates that there are certain fundamental differences in the objectives of public and private sector enterprises. Further, the basic theoretical assumptions tested have been found to be, prima facie, valid in the Indian context. The paper thus establishes a case for further research to develop a comprehensive technique for the comparison of public and private sector enterprises in the Indian context.Originality/valueExtant research on the subject of comparing public and private entries has limited itself to technoeconomic considerations and has not taken into account the different objectives/nature of these enterprises. The study established a case for diverging from the present discourse privatization and private sector supremacy. The same could have far-reaching consequences for policymakers, especially in developing countries.

Pakistan's economic structure presents the spectacle of mixed economy in which private and public enterprises coexist in the same and related fields of economic activity. While on the one hand, the government has adopted various measures to encourage and assist the development of private enterprises, it exercises at the same time large measure of direct and indirect control over private enterprise. From the beginning it was recognized that in view of great need for development there was ample room for both private and public enterprise and that both are desirable agencies for development. The first government policy statement in 1948 reflected the view that monopolies and public utilities were peculiarly suitable for nationalization, and that communication and transport services such as posts, telegraph, telephone, wireless, broadcasting, railways and air transport should be owned and operated by the government. In road transport, where both public and private enterprise coexisted at that time, and in river transport, which was entirely within the private sphere, the prospect of their eventual nationalization was not ruled out. With the exception of three other specific fields of activity-(a) arms and ammunition, (b) the generation of hydel power and (c) the manufacture of railway wagons, telephones, telegraph and wireless apparatus-private enterprise was given full scope to operate, though the government reserved the right to take over or participate in any other industry vital to the security or economic well-being of the State. Moreover, it was decided that if adequate private capital did not come forward in any particular industry of national importance, the government might set up a limited number of standard units [more] as measure of attracting private enterprise than for any other object.' In the restatement of industrial policy made decade later, an even greater emphasis is placed upon private enterprise.2 The 1959 statement pledges to give maximum scope to private enterprise in the development of the resources of the country within the framework of the national Five Year Plans. The fields reserved for public enteprise are again (a) arms and ammunition, (b) railways, air transport and tele-communications and (c) the production of atomic energy. River transport is reserved for private enterprise and no longer with any threat of ultimate nationalization. Road

There are currently strong external pressures in place to increase efficiency in the public sector. The reason for these pressures is an assumption that due to agency problems and opportunism, public enterprises have a tendency to accumulate slack, i.e. to develop lower efficiency compared to what might be achievable in the private sector. Private enterprises form the basis for comparison, and new management techniques are often transferred from the private to the public sector. This article is based on a case study involving two refuse collection enterprises: one public and one from the private sector. Both work in the same market and apply the same technology. The purpose is to investigate whether there are indications of slack in the public refuse collection enterprise, and whether the management control systems applied are suitable for controlling the level of slack. Moreover, additional focus is placed on the differences in management between the two enterprises, representing the public and private sector, respectively. The results indicate that the public refuse collection enterprise had a higher level of slack than the private enterprise, and that the management control systems were not suitable for reducing the level of slack to any significant extent. In the private enterprise, there was a higher degree of budgetary emphasis, the owners made greater demands, employees were more closely supervised and there was a greater degree of participation. In this article, we discuss whether these results may contribute towards explaining any differences in efficiency that may occur between private and public enterprises.

This paper surveys and analyzes the economic literature on ‘privatization’ policies, restricting coverage to policies designed to improve the operating efficiency of public sector enterprises through increased exposure to competitive market forces. These include asset sales, liberalization (or deregulation) and franchising. The objectives, incentives and constraints of public and private enterprises are examined, and evidence on their comparative performance is analyzed. Public sector revenue effects from asset sale are also explored. On the basis of these considerations, the paper concludes that liberalization is an important ingredient in any policy package designed to improve the operating efficiency of public sector enterprises. Asset sale may enhance the beneficial impact of deregulation but asset sale in the absence of deregulation is unlikely to improve efficiency, and may introduce additional market distortions. Franchising is seen as an appropriate mechanism for privatization when the market is inherently monopolistic and when the government desires to retain control over output and/or price.

Consumer environmental awareness and privatization

The main objective of the study was to compare management disruptions and business growth in both public and private sector enterprises. It involved four public sectors and four private sector enterprises, which comprised 221 respondents from staff and management of the enterprises as the sample size for the study. A stratified sampling technique was adopted for the study. Validated structured questionnaires were used for data collection. The statistical techniques adopted for processing the data and testing the hypotheses for this study were comparing mean using independent samples t-test via the use of statistical package for social science (SPSS) software version 21. Descriptive statistics and frequency analysis was used to explain the tables of the various variables. The mean response was tested using a student t-test. The findings of the study revealed that personal values which is the first variable revealed that there is no significant difference in ethical leadership and business growth between the Public and Private enterprises (Sig = .728, P>0.05). Similarly, Social values which is the second variable showed that there is no significant difference in management disruptions and business growth between the Public and Privateenterprises (Sig =.238, P>0.05). Moral values which is the third variable showed that there is also no significant difference in management disruptions and business growth between the Public and Private enterprises (Sig =.007,P>0.05). The study concluded that the leadership of the public and private enterprise should have the ethical values, interpersonal qualities and capabilities to carry out the different tasks as needed by the organizations. Hence, the study recommended that the efforts in promoting management disruptions practices in public and private enterprises must start and be perceptible at the top of the organization.

Ownership rights to private property may be purchased and sold by individuals. The taxpayer-owner of public property, however, does not possess this option to exchange his share of public property. He is compelled to be a public owner and is an equal owner with all other citizens of the state. An important implication of the ability to transfer ownership in the private sector is that costs and rewards of economic activities accrue more directly to the individual responsible for them. In particular, private property facilitates capitalization of future consequences into current transfer prices. Accordingly there is a higher correlation between the reward-cost structure and the economic effort of the individual.2 A second important implication is that transferable ownership generates comparative advantage effects. Interpersonal differences with respect to abilities and knowledge among individuals can bring increased specialization in the ownership of business that will increase aggregate wealth in the case of privately-owned enterprises. The inability of individuals to purchase and sell claims to public property prevents specialization in ownership and inhibits inexpensive detection and rectification of poor management practices. As a result of the transferability of ownership, we would expect, ceteris paribus, private businesses to be more efficient than government firms.

Subject. The article addresses the efficiency and sustainability of public, private, and foreign-owned enterprises. Objectives. The aim is to develop and test a methodology for analyzing the said enterprises. Methods. The study rests on general scientific principles and research methods, like abstraction, generalization of approaches to the analysis of enterprises of different forms of business ownership. Results. I developed a methodology, which includes three stages. First, estimating the share of enterprises of different forms of ownership in total assets, revenue, and profit, and analyzing the sectoral and regional sample structure and enterprise size. Second, assessing the short-term and long-term efficiency, with analysis of profitability indicators, long-term dynamics, and investment activity. Finally, analyzing the adaptability of enterprises of different forms of ownership to changed conditions, and evaluating the indicators of financial stability, riskness, and dynamics for 2022. Conclusions. I tested the methodology on data from large Russian consolidated businesses (a total of 593 enterprises for 2018–2022). The calculations and analysis showed that private business prevails in assets, revenue, and net profit. For State-owned enterprises, the most significant industry is oil and gas production, for foreign-owned ones – production and distribution of electricity, gas and water, for private enterprises – retail trade. Higher profitability is typical for foreign and private enterprises. The analysis of adaptability to current conditions showed that revenue growth rate in 2022 did not decrease vs. the annual average for all groups of enterprises, however, profit and profitability indicators deteriorated. In general, large consolidated public, private, and foreign-owned business demonstrated a relatively high degree of stability in 2022 with a decrease in profit and profitability, and now it continues investment activity.