Privatization grows amid battle for funds

Privatization grows amid battle for funds

SINGAPORE (AFP): Asia's feverish pace of privatizing public
enterprises has been undeterred by economic difficulties but the
region will have to compete harder for investment capital,
experts at a World Bank-sponsored conference said Monday.

"The economic turmoil has heightened financial pressures on
governments and, therefore, one of the key drivers of
privatization which is proceeds maximization is now very much in
focus Asia-wide," said Richard Orders, chairman of Dutch bank
ABN-AMRO Asia Corporate Finance Ltd.

But Orders said the regional economic crisis triggered by
rapid currency depreciations since mid-1997 had forced
governments to market their privatization bids more aggressively
because of competition from Eastern Europe and Latin America.

"Price and quality are now much more in emphasis than they
were ever before," Orders told reporters on the sidelines of the
World Bank-Asia-Pacific Privatization Network (APN) Convention.
The APN, established with help from the World Bank in 1995, is an
informal association of ministers and other senior officials
charged with implementing privatization plans in Asia.

Orders said potential investors in Asia's privatization
exercises would scrutinize the region's regulatory environment,
quality of management and market position of companies much more
closely than before.

"Price and quality are now much more in emphasis than they
were ever before," said Orders, whose bank actively raises funds
for private infrastructure in Asia.

Kevin Young, manager of the World Bank's privatization
services group, told AFP that Asian economies were "pushing very
hard" to expand privatization programs.

"I don't know of any country that is reducing the program
because of the turmoil," he said, citing Thailand, Indonesia and
South Korea -- the worst affected by the crisis -- to be among
the most keen in privatization.

Young said that China and India, which have probably the
largest number of state sectors left in the world, had also
proposed expansion of their privatization programs.

"What Asian governments are seeing is that privatization is
the kind of reform they need to get out of their difficulties --
this is part of the solution not part of the problem," he said.

Young said the "two very big issues" facing privatization in
Asia were how to deal with labor in state enterprises farmed out
to the private sector, and how to market privatization exercises
more effectively.

Last year, the World Bank estimated that about 13 billion
dollars' worth of state enterprises were privatized in Asia, with
a large portion in China.

"I think the trend is up so far this year," Young said.
London-based publication Privatization International said in a
report circulated at the conference that on a global scale,
private investment in infrastructure was estimated at
approximately $60 billion a year.

It said power and telecoms dominated private infrastructure
investment, followed by transport and then water and waste
projects.

Orders of ABN-AMRO Bank said initial public offers (IPOs)
would be the main driver of privatization in Asia but trade sales
-- in which governments allow strategic stakes in key industries
to go to particular investors -- would gain momentum because of
the regional economic crisis.