Recent Privatisation Trends* I. Introduction and summary Over the past two decades, privatisation has become a key ingredient in eco- nomic reform in many countries. In the last decade alone, close to one trillion US dollars (USD) worth of state-owned enterprises have been transferred to the private sector in the world as a whole. The bulk of privatisation proceeds have come from the sale of assets in the OECD member countries. Privatisation have affected a range of sectors such as manufacturing, banking, defence, energy, trans- portation and public utilities. The privatisation drive in the 1990s was fuelled by the need to reduce budgetary deficits, attract investment, improve corporate effi- ciency and liberalising markets in sectors such as energy and telecommunications. The second half of the 1990s brought an acceleration of privatisation activity espe- cially among the members of the European Monetary Union (EMU), as they started to meet the requirements of the convergence criteria of the Maastrich Treaty. After a decade of growth, global privatisation proceeds in 2000 stood at USD 100 billion,1 down by almost one third from the levels attained in 1999 (Table 1). Much of the decline took place in the OECD countries, which saw their traditionally high share of world privatisation proceeds reduced. Nevertheless, the OECD area continued to account for well over half of global proceeds (Figure 1), the bulk of which came from members of the European Union (EU). * This article was prepared by Ladan Mahboobi, Corporate Affairs Division. The data are from the OECD Privatisation Database and have been prepared by Ayse Bertrand of the Financial Statistics Unit. The data base captures, from national and other sources the amounts raised from privatisation in OECD countries and incorporates privatisation data from the World Bank Privatisation Database for information on non-member countries. The amounts reported are gross values of transactions, which may not necessarily correspond to the net amounts available to the government as a result of disposal of its assets. Other information reported in this article is based on various media reports including Financial Times, and Privatisation International. 43 © OECD 2001 FinancialNo. MarketTrends, 79, June 2001 44 Table 1. Country breakdown of global amount raised from privatisation1 USD million 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000p Australia 19 1 042 1 893 2 057 2 055 8 089 9 052 16 815 7 146 15 220 6 239 Austria2 32 48 49 142 700 1 035 1 302 2 438 2 537 70 2 083 Belgium 956 548 2 745 1 222 1 842 2 288 10 Canada3 1 504 808 1 249 755 490 3 998 1 768 11 Czech Rep.4 1 077 1 205 994 442 469 707 544 Denmark 644 122 229 10 366 45 4 502 19 111 Finland 229 1 120 363 911 835 1 999 3 716 1 827 France5 12 160 5 479 4 136 3 096 10 105 13 596 9 478 17 438 Germany6 325 435 240 13 228 1 125 364 6 734 Greece 35 73 44 558 1 395 3 960 4 880 1 384 Hungary 38 470 720 1 842 1 017 3 813 1 157 1 966 353 88 66 Iceland 21 10 2 6 4 128 228 1 Ireland 515 70 274 157 293 4 846 1 458 Italy7 759 3 039 9 077 10 131 11 225 24 536 14 497 25 594 9 728 Japan 13 875 2 039 6 641 15 115 Korea 817 2 435 480 1 849 539 599 6 249 1 307 Luxembourg Mexico 3 124 10 757 6 864 2 531 766 170 73 2 670 988 279 406 Netherlands 716 179 780 3 766 3 993 1 239 842 335 1 481 310 New Zealand 3 895 17 967 630 29 264 1 839 441 1 331 Norway 73 118 521 660 35 454 1 039 Poland 23 171 373 433 725 1 101 1 442 2 043 2 079 3 422 5 993 Portugal 1 092 1 002 2 206 422 1 123 2 362 3 001 4 909 4 299 1 620 3 256 Slovak Republic8 63 415 1 004 486 11 Spain 172 820 3 222 1 458 2 940 2 678 12 529 11 618 1 129 1 079 Sweden 378 252 2 313 852 785 2 390 172 2 071 8 082 Switzerland 10 869 Turkey 486 244 423 566 412 572 292 466 1 020 38 2 712 UK9 12 906 21 825 604 8 523 1 341 6 691 6 695 4 544 US 3 650 3 100 © OECD 2001 © OECD Total OECD 24 724 37 402 17 396 40 294 50 884 56 684 68 250 96 175 94 011 104 780 65 063 Of which: EU 15 15 562 23 894 4 886 30 590 27 469 35 460 46 599 67 535 60 167 61 649 46 756 Other countries10 8 494 11 078 16 098 17 920 17 974 13 546 21 493 57 099 45 153 37 107 35 000 Global total 33 218 48 480 33 494 58 214 68 858 70 230 89 743 153 273 139 164 141 886 100 063 © OECD 2001 Table 1. Country breakdown of global amount raised from privatisation1 (cont.) USD million Notes: .. Not available – Nil or insignificant p. Provisional 1. The amounts shown are gross proceeds from direct privatisations. These do not necessarily correspond to the net amount available to the government. The figures are on a calendar year basis and they may not add up to published budget figures. 2. Statistics refer only to privatisations by the central government. 3. There were no federal privatisations in 1997 and 1999. Provincial data are currently not available 4. The cumulative amount for the period 1991-93 is USD 2 240 million. 5. The proceeds reported in 2000 include a USD 16.4 billion indirect privatisation arising from a transaction through which France Telecom shares were used as payment in lieu of France Telecom's acquistion of Orange. 6. Up to 1997, information on trade sales is not available. 7. Including indirect privatisations during 1996-2000 raising million USD 2 325; 2 018; 3 235; 5 791 and 9 244 respectively. 8. Source is World Bank. 9. Debt sales amounting to for years 1990-97 (fiscal years: £5 347 million, £7 924 million, £8 189 million, £5 453 million, £6 429 million, £2 439 million, £4 500 million, respectively. 10. For 1990-1999 the source is World Bank; 2000 data are OECD estimates. Source: OECD privatisation database (based on national statistics), unless otherwise indicated. Recent Privatisation Trends 45 Financial Market Trends, No. 79, June 2001 Figure 1. Global amounts raised from privatisation USD million USD million OECD Other countries 160 000 160 000 140 000 140 000 120 000 120 000 100 000 100 000 80 000 80 000 60 000 60 000 40 000 40 000 20 000 20 000 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000p Source: OECD Privatisation Database and World Bank. The cooling of OECD-area activity must be seen against the background of a hectic activity in the second half of 1990s. The drop is also attributable to the unfavourable equity market conditions, particularly in the technology and commu- nications sector, and a diminishing inventory of assets available for sale as privati- sation programmes have begun to mature in many of the member countries. In non-OECD countries privatisation proceeds have been declining since their peak in 1997. According to preliminary estimates proceeds in 2000 were slightly below their 1999 levels. However, within regions there were notable exceptions such as the strength of activity in Latin America – notably in Brazil. During 2000, the sale of telecom sector assets continued to be a main source of proceeds in the OECD, while transportation and energy appear to have been the most important source of activity outside the area. Throughout 1990s, public offerings were the dominant method of sale in OECD countries. In 2000, however, there were few very large transactions (which are nor- mally carried out through public offerings), and the uncertain and volatile market conditions meant that the importance of this method of sale was significantly dimin- ished.2 In non-OECD countries trade sales continued to be the main method of sale. 46 A significant development, however, was the USD 4 billion public offering of the © OECD 2001 Recent Privatisation Trends Brazilian oil and gas producer Petrobras. It was one of the most significant transactions outside the OECD area and, in what marked a departure from the past experience in Brazil, it was characterised by strong domestic retail participation. Over the past decade privatisation of state-owned enterprises has acted as a stimulus to the development of capital markets – particularly in Europe – inter alia by contributing to the emergence of an equity culture. Along with the launch of EMU, it has assisted the emergence of a market for corporate control, as evi- denced by the flurry of activity involving the former and partially state-owned enterprises that began in 1999. Individual cases include the hostile take-over bat- tle for Telecom Italia between Olivetti and Deutsche Telecom, TotalFina's unin- vited bid for Elf and a three-way battle in the French banking sector. Even so, the development of a fully competitive market for corporate control may not be as rapid as initially foreseen,3 due in part to continued state control through partial shareholdings and golden shares. The recent controversy over EdF’s (the French state-owned electricity com- pany) acquisition of stakes in the Italian electric utility Montedison has under- lined the sensitivities of corporate control and the concerns over the perceived absence of a level playing field.