CONTENTS
Foreword = xi
The Report Team =xiii
Acknowledgments = xv
Definitions = xvii
Introduction and Overview = 1
What Makes for Success in State Enterprise Reform? = 4
Contracting : What Works, What Doesn't, and Why = 6
The Politics of Reforming State-Owned Enterprises = 10
What Can Be Done to Spur Reforms and Improve Outcomes? = 14
1 Bureaucrats Are Still in Business = 25
State-Owned Enterprise Sector Remains Large Despite Increasing Divestiture = 25
How SOEs Affect Economic Performance = 33
Conclusion = 50
Notes = 51
2 Success and Failure in SOE Reform = 55
Measuring Success and Failure = 57
What Reform Characteristics Distinguish Successful Reformers? = 66
Divestiture and SOE Reform = 67
Outgrowing stated-Owned Enterprises : An Alternative to Divestiture? = 71
Divestiture Alone Is Seldom Enough = 75
Improving SOE Performance through Competition = 76
Hard Budgets = 81
Financial Sector Reform = 86
Changing the Relationship between Governments and SOE Managers = 93
Conclusion = 95
Appendix 2.1 : Reforms to Open SOE Markets to Competition and Introduce Hard Budget Constraints = 97
Appendix 2.2 : Financial Sector Reform = 101
Notes = 103
3 Contracting : What Works, What Doesn't, and Why = 107
How Incentive Factors Interact to Influence Outcomes = 109
Performance Contracts : With Public Managers = 112
Management Contracts : With Private Managers = 133
Regulatory Contracts : With Private Owners = 150
Conclusion = 168
Notes = 171
4 The Politics of SOE Reform = 175
Assessing Condition Ⅰ : Political Desirability = 178
Assessing Condition Ⅱ : The Political Feasibility of SOE Reform = 190
Assessing Condition Ⅲ : The Credibility of State-Owned Enterprise Reform = 203
Explaining and Predicting Reform Success = 215
Conclusion =217
Appendix 4.1 : The Politics of State-Owned Enterprise Reform : Additional Evidence = 218
Notes = 227
5 How to Spur Reforms and Improve Outcomes = 231
How to Tell Whether a Country Is Ready to Reform = 233
What to Do in Countries Not Ready for SOE Reform = 237
What to Do in Countries Ready for SOE Reform = 241
What to Do with SOEs That Cannot Be Divested = 250
Conclusion = 257
Notes = 257
Implications for Foreign Assistance = 259
Statistical Appendix = 263
References = 325
Index = 341
Boxes
1 How Foreign Aid Can Better Assist State-Owned Enterprise Reform = 17
1.1 What Is a State-Owned Enterprise? = 26
1.2 Welfare Consequences of Selling State-Owned Enterprises = 39
1.3 Privation and Pollution = 41
2.1 China's Ownership Patterns : Not State but Not Private = 66
2.2 External Incentives and Corporate Behavior : The Case of Shepheard's Hotel = 67
2.3 Getting the Most from Privatization = 72
2.4 How China's Township and Village Enterprises Differ from State Enterprises = 74
2.5 Uncovering Hidden Subsidies = 82
2.6 Procurement Favors SOEs over Private Manufacturers in India = 85
2.7 Roles of a Well Developed Financial System in SOE Reform = 87
2.8 Measuring Financial Sector Development = 90
2.9 The Financial Sector and SOE Reform : The Case of Poland = 91
2.10 Weak Financial Regulation Can Undermine Privatization : The Case of Chile = 93
3.1 Measuring SOE Performance : What about Social Goals? = 115
3.2 Performance Contracts in China = 131
3.3 Sri Lanks's Experience with Management Contracts = 140
3.4 Price Cap and Benchmark Regulation = 160
4.1 Indicators of Coalition Realignment : The Mexican Example = 182
4.2 State Enterprise Reform in China = 189
4.3 Compensation of Reform Losers in Chilean SOE Reforms = 196
4.4 Mass Privatization through Vouchers in the Czech Republic = 202
4.5 Measuring Credibility = 206
4.6 Locking in Reform : Restraints on Executive Discretion in Chile = 211
5.1 Getting Ready for Reform = 238
5.2 Privatization Can Have Pitfalls = 244
5.3 Guarantees and Privatization = 251
Tables
1 Unmet Conditions in Less Than Successful SOE Reformers = 14
1.1 Divestiture in Developing Countries, 1980-93 = 27
1.2 Revenue from Divestiture in Developing Countries by Region and Sector, 1988-93 = 28
2.1 Twelve Countries Undertaking State-Owned Enterprise Reform = 56
2.2 Successful Reformers Divested More = 69
2.3 Privation in Manufacturing = 70
2.4a Prereform Status of Domestic Competition, Selected Industries = 78
2.4b Postreform (1994) Status of Domestic Competition, Selected Industries = 79
2.5 Measure of Foreign Competition = 80
2.6 Government Transfers to State-Owned Enterprises (1978-91) and Price Regulation = 83
2.7 Institutional Reforms of State-Owned Enterprises in the 1980s = 94
3.1 Number of Performance Contracts in Developing Countries, by Sector = 112
3.2 Case Study Enterprises = 114
3.3 Comparison of Target Characteristics = 122
3.4 Comparison of Contract Incentives = 125
3.5 Instances of Government Reneging in Whole or in Part = 127
3.6 Comparison of Performance with Selected Contract Characteristics = 132
3.7 Management Contracts by Country = 135
3.8 Management Contracts by Sector = 136
3.9 Sample of Management Contracts = 137
3.10 Summary of Outcomes = 138
3.11 The Effects of Selection and Financing on Contract Performance = 146
3.12 Value of Recent Infrastructure Privation in Developing Countries = 151
3.13 Sample of Countries with Private Sector Participation in Telecommunications = 152
3.14 Indicators of Quality of Telecommunications Service, before and after Reform = 155
3.15 Mechanisms for Reveling Information about Telecommunications = 157
3.16 Price Regulation in Sample Countries = 161
3.17 Agencies Enforcing Regulations : Their Neutrality, Enforcement Powers, and Skills = 164
4.1 Condition Ⅰ for State-Owned Enterprise Reform : Political Feasibility = 180
4.2 Estimates of Overstaffing in State-Owned Enterprises = 192
4.3 Condition Ⅱ for State-Owned Enterprise Reform : Political Feasibility = 193
4.4 Condition Ⅲ for State-Owned Enterprise Reform : credibility = 208
4.5 Unmet Conditions in Less Than Successful SOE Reformers = 216
Appendix tables
A.1 Share of State-Owned Enterprises in Economic Activity, 1978-91 = 268
A.2 Share of State-Owned Enterprises in Nonagricultural Economic Activity, 1978-91 = 272
A.3 Share of State-Owned Enterprises Investment in Gross Domestic Investment, 1978-91 = 276
A.4 State-Owned Investment as a Proportion of Gross Domestic Product, 1978-91 = 282
A.5 Share of State-Owned Enterprises in Employment, 1978-91 = 288
A.6 State-Owned Enterprises Overall Balances before Transfers as a Proportion of Gross Domestic Product, 1978-91 = 292
A.7 Net Financial Flows from Government to State-Owned Enterprises as a Proportion of Gross Domestic Product, 1978-91 = 296
A.8 Share of State-Owned Enterprises in Gross Domestic Credit, 1978-91 = 300
A.9 Gross Domestic Credit to State-Owned Enterprises as a Proportion of Gross Domestic Product, 1978-91 = 304
A.10 Share of State-Owned Enterprises in Total External Debt, 1978-91 = 308
A.11 External Debt of State-Owned Enterprises as a Proportion of Gross Domestic Product, 1978-91 = 312
Figures
1 A Decision Tree for State-Owned Enterprise Reform = 16
1.1 Share of State-Owned Enterprises Investment in Gross Domestic Investment, by Region = 29
1.2 Share of State-Owned Enterprises in Gross Domestic Product, by Region = 31
1.3 Share of State-Owned Enterprises Employment in Total Employment, by Region = 32
1.4 Three Measures of SOE Importance in Low-Income Economies = 34
1.5 Pollution Abatement Efforts = 40
1.6 Water Pollution Levels, by Age and ownership of Firm, Indonesia = 40
1.7 State-Owned Enterprises Saving Minus Investment = 43
1.8 Net Financial Transfers to State-Owned Enterprises as a Share of Gross Domestic product = 44
1.9 State-Owned Enterprises Share in Gross Domestic Credit = 44
1.10 State-Owned Enterprises share in Total External Debt = 45
1.11 Explicit Operating Subsidies to State-Owned Enterprises = 48
1.12 Indicators of State-Owned Enterprise Performance in Developing Countries = 49
2.1 Financial performance of State-Owned Enterprises = 59
2.2 Productivity of State-Owned Enterprises = 62
2.3 Saving Minus Investment as a Percentage of Gross Domestic Product = 63
2.4 China : Growth Rates by Ownership Type = 73
2.5 China : Response of State Sector to Competition from Nonstate Enterprises = 77
2.6 Indicators of financial Sector Development, 1991 = 89
3.1 Pre-and Postcontract Performance : Net Rate of Return on Revalued Assets = 116
3.2 Pre-and Postcontract Performance : Labor Productivity = 117
3.3 Pre-and Postcontract Performance : Total Factor Productivity = 119
3.4 Performance Changes after the Introduction of Performance Contracts = 120
3.5 Implementation of Management Contracts : Summary of Results = 139
3.6 Contract Effects of Fee Structure, Autonomy, and Duration on performance = 142
3.7 Telecommunications Reform : Impact on Network Expansion, Labor Productivity, and Returns = 154
4.1 Net Aid Flows to Egypt = 185
4.2 Net Aid Flows to Senegal = 187
4.3 Chile : Employment Reduction in Selected State-Owned Enterprises = 195
4.4 Ghana : Planned and Actual Employment Reductions in SOEs = 198
5.1 A Decision Tree for State-Owned Enterprise Reform = 232
Box Figures
1.2 Welfare Effects of Selling State-Owned Enterprises = 39
1.3 SOE and Private Contribution to Pollution in Brazil = 41
1.4 Financial Sector Development, 1991 = 90
