Increased Efficiency of Privatised Enterprises in Developing Nations

1. INTRODUCTION

The issue of State owned enterprises, or Public enterprises, versus Privatised enterprises have been topic of controversy in the economic development in developing in past decades. According to Van de Walle (1989, p. 601), privatization can be defined as “a transfer of ownership and control from the public to the private sector, with particular reference to asset sales”1. In the analysis of whether there has been an increase in efficiency of privatization of State owned enterprises in developing nations a distinction must be made between the effects of privatization and liberalization; however the economic reform often goes hand-in-hand with each other. According to Van de Walle (1989, p. 601), liberalization can be defined as “a change in the relative prices operating in the economy”2. A board generalization can be made that most current developing nations are nations that have gained independence from colonial rule in the past 150 years. Nellis and Kikeri (1989) proposed that those nations that gained independence from colonial rule tended to inherit a public enterprise sector. This resulted in established and, relative to the rest of the nation, technologically advantaged pivotal industries that were commonly developed through direct colonial investment and exploitation of the indigenous pollution. An example of this would be the South African Post Office, which would later spawn the telecommunications giant Telkom, which was established during the British colonial rule of South Africa. In developed nations, such as those in Europe, the expansion of public enterprises came as a result of increased socialization and nationalization after World War II. This was supported until the 1980’s as there was a tendency...

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