Privatisation in Developing Countries: A Review of the Evidence and the Policy Lessons

Privatisation is widely promoted as a means of improving economic performance in developing countries. However, the policy remains controversial and the relative roles of ownership and other structural changes, such as competition and regulation, in promoting economic efficiency remain uncertain. This paper reviews the main econometric and case study evidence on the impact of privatisation on economic performance in developing economies. The evidence reviewed suggests that if privatisation is to improve performance over the longer-term, it needs to be complemented by policies that promote competition and effective state regulation, and that privatisation works best in developing countries when it is integrated into a broader process of structural reform. The paper also draws lessons for policy in terms of privatisation objectives, institutional capacity, administrative competence and probity and competition and regulatory capability.