26 in general, a recent survey shows a substantial recent<sup>declineinsupportof privatization,mainly</sup> due to weak economic conditions but also as a result of<sup>the waysin whichtheprocesshasbeen</sup> operating in practice and increases in corruption.'<sup>2InRussia, the massprivatizationprogram</sup> pernmitted insiders to engage in extensive "self-dealing",<sup>whilethesubsequentprivatization</sup> "auctions" were a massive giveaway of the most important<sup>assetsatbargainpricestoahandful</sup> of well-connected oligarchs, who, in the absence<sup>ofadequate legalandinstitutional</sup> arrangements, continued to act that way (Black,<sup>Kraakman,andTarassova,2000).Asaresult,</sup> the public came to oppose privatization, associating<sup>it withcorruptionandwealthforachosen</sup> few.

70. Putting transparency into place requires a host of<sup>measures.Speed andfulltransferof</sup> assets, without special privileges and concessions for<sup>insiders,iscrucial,particularlyinthecase</sup> of competitive enterprises. Evidence from Mexico,<sup>Bulgaria,South Africaandelsewhere</sup> indicates that, once a firm is slated for privatization,<sup>delaysincompletingthe transactionlead to</sup> a decline in operations, asset stripping, and a lower<sup>salesprice.'3Ultimately,fewbuyersmay</sup> come forth and, rather than liquidating such<sup>firmswhichis therighttechnical approachbut</sup> politically unpalatable, special deals may need to<sup>benegotiated,increasingthechancesfor</sup> intransparencies. On the other hand, selling firms, particularly<sup>infrastructurefirms,in the absence</sup> of efforts to enhance competition and regulation,<sup>andthus enhancetransparencyandprotection</sup> of consumers against the abuse of remaining monopoly<sup>power,canproveextremelycostly. The</sup> general rule should be to move swiftly on the privatization<sup>of firmnsoperatingincompetitiveor</sup> potentially competitive markets, but get the market<sup>structureright inprivatizinginfrastructure</sup> firms.

71. An effective institutional framework is needed,<sup>though callingforithasproveneasier</sup> than putting it into effect.'<sup>4</sup> This involves creating<sup>somesort of focalpoint for privatizationwith</sup> minimal bureaucracy, direct access to and support<sup>of thehighestpoliticalauthorities,and</sup> adequate resources and flexibility to hire the many-and<sup>expensive-privateresourcesneededto</sup> prepare and complete the sale. (Independent<sup>financialadvisorsandqualifiedexpertsplayan</sup> important role in the process, particularly in carrying<sup>out independent, market-basedasset</sup> valuations to ensure that prices are realistic, fair-and<sup>politicallydefensible.)</sup> Leaving privatization to sector ministries can work where<sup>thereisahighdegreeof politicalcommitment</sup> and adequate administrative capacity (for a time Bulgarian<sup>sector ministries privatizedas well or</sup> better than the national Privatization Agency), but<sup>suchconditionsaretypicallylackinginmost</sup> countries. Having a variety of sale points causes concerns<sup>aboutconsistency and transparency,</sup> and raises the issue of how to find and reward the<sup>scarceresourcesrequiredin oneprivatization</sup> agency, much less many.

72. Promoting competition in the transaction process itself<sup>isperhapsthe most effectiveway</sup> to obtain transparency; as well, it yields the maximum<sup>economicandfinancialbenefits. Clearly</sup> defined competitive bidding procedures for calling,<sup>evaluating,andawardingoffersare</sup> important, including the public opening of bids (in Bolivia,<sup>this was doneon nationaltelevision).</sup>

> **12** The Economnist, July 28-August 3, p. 38.

> 13 In his study of Mexican SOEs, Lopez de Silanes<sup>(1997)foundthatnetrevenuesforgovernmentdropped24</sup> percent for each additional year that privatization<sup>was delayed.</sup>

> 14 The full range of institutional options and the<sup>tradeoffsinvolvedare discussedin detail in Guislain,1997.</sup>