5 Privatization of certain sectors like health and education may lead to those

5 privatization of certain sectors like health and

This preview shows page 137 - 139 out of 146 pages.

5. Privatization of certain sectors like health and education may lead to those very goods being provided in inadequate qualities and at prices that are too high for lower income consumers. This is a market failure problem 137
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6. The private sector may lack entrepreneurship skills and capital to develop certain establishments which require heavy capital investments like airways, ports and harbors. 7. It would imply greater control by multinational corporations with their related problems of transfer pricing and repatriation of proceeds. 8. Privatization could miss its objective of supporting an economic recovery under conditions of competitiveness and efficiency if it would be implemented in a market closed to foreign competition . 9. Private companies cannot prosper if they have to compete with public ones that enjoy subsidies and privileges or that find in the public budget easy means to cover operating losses. 9.4 Kenyan Experience with Privatization/Commercialization/Concessioning In most countries, irrespective of the methods of privatization adopted, the process is extended over several years. From the point of view of stimulating popular support for privatization, there is an obvious temptation to privatize what appear to be the most profitable firms first. Privatization program can cover the entire economy, or be confined to certain sectors or types of enterprises. Some countries have no intention of privatizing publicly provided services such as education (restitution in countries like Hungary may return many schools to ownership of the church) or health. In Hungary the government targeted to reduce the state share in state-owned enterprises to less than 50% in 1994 and to raise the share of foreign ownership. In Kenya, privatization/Commercialization processes have been going on for some time. The most recent was the concessioning of both Kenya and Ugandan Railways to Rift Valley Railways for a period of 25 years. Details obtained from Kenyan Ministry of Finance website ( ) as of July 2007, show that the department tasked with the issue of privatization, Department of Government Investment and Public Enterprises has lined up several public enterprises for privatization. One of the functions of this department is restructuring and coordinating the implementation of the privatization programme and Private Public Partnership (PPP) initiative. The transactions on-going in 2007/08 FY include: - Secondary offer of 18% GoK shares of Mumias Sugar Company Secondary Offer of 19% KenGen Shares 40% of GoK’s Kenya Reinsurance off-loading to the public through Initial Public Offer (IPO) Divesture of 26% GoK shares in Telkom to strategic partner through international competitive bidding process (with International Financial Corporation, IFC, as the transaction Advisor) and 34% to the public through IPO Concessioning of Kenya Ports Authority (KPA’s) container terminal In addition, operationalization of Privatization Act 2005 and establishment of a Privatization Commission provided the necessary frameworks.
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