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.