-6-

all loans with divestiture components. Operations are concentrated in a few countries, including Togo, Ghana, Guinea, Niger, and Senegal. The preponderance of Bank involvement in Africa reflects a variety of factors, including the existence of large, overextended, and loss-making PE sectors; pressing public finance and debt pressures in many countries; ready markets for the divestiture services the Bank is most suited to provide (e.g., studies); greater Rank leverage in the region; and the availability of public sector management staff in the Africa operational complex. Prior to 1987, Latin America (LAC) was the only other region with Bank involvement in this field. To date, eight of the sixteen approved operations in this region with divestiture components are found in Jamaica and Panama; Mexico and Uruguay also have significant divestiture components. Bank involvement in the remaining TAC is relatively minor. Since 1987, nine operations with divestiture components have been approved in the Europe, Middle East and North Africa (EMENA) and Asia regions.9 The PELs in Morocco and the Philippines are the largest in scope. Several factors may limit Bank involvement in these regions, includin7 fewer policy based operations, greater country ability to handle divestiture programs, and resistance to external involvement in this sensitive area.

11. The operations under review provide different types of divestiture support.10 On a global level, SALs help establish the policy dialogue and framework for reform, and release tranches against the implementation of specific divestment targets. On a more specific level, the Bank supports three main aspects of divestiture. (Table 3 provides a case-bycase tabulation). First, a large number of operations center on laying the foundations for a rethinking of the state policy on PEs, and developing a strategy for reform. Some fifty operations in 28 countries thus support PE studies and audits, classification exercises, and action plans which help: (i) collect essential PE data and assess viability; (ii) decide which PEs should remain in public hands, be privatized (partially or fully), or liquidated; and (iii) establish a time-frame for implementation. Second, a number of operations also provide institutional support to strengthen government capacity for managing divestiture. Some 30 operations help define the organizational structure for implementation, and finance short and long-term technical assistance for a variety of tasks (asset valuation, resolution of 9 Many countries have, however, carried out or are in the process of carrying out such reform without direct Bank involvement or project assistance. Bangladesh, Malaysia, Thailand, and Jordan are important examples. In some cases, such as Malaysia and Thailand, Bank staff have conducted analytical work and begun policy dialogue on divestiture.

10 Bank support for divestiture is usually employed in conjunction with other measures that aim to improve the overall environment within which PEs operate. These include policy and institutional reforms related to credit, financing, pricing, and labor, and government/PE relations. These issues are treated in a separate background paper. See Ahmed Galal, Public Enterprise Reform and the World Bank: A2proach. Practices. and Challenges, November 1989, CECPS.