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reform. Indeed, these latter measures may generate greater labor opposition than that directly attributable to divestiture. Nevertheless, labor opposition can indeed slow the pace of the divestiture program, particularly in countries where past employment and pay policies have granted job security and relatively high wages to large and excess numbers of employees and where there is an absence of alternative employment opportunities elsewhere in the economy. Other countries have, however, found ways to mitigate labor opposition. In the Philippines, for instance, where overstaffing has been less of a problem, 80% of the workers were rehired by the divested companies. Generous severance packages were provided to the laid-off staff. Similar experiences have been recorded in Panama and Malaysia.27 In Mexico, employment concerns were ameliorated by the early involvement of workers unions, who became partners in eleven of the newly divested companies. Other countries such as Bangladesh and Malaysia have minimized the potential negative impact of restructuring by reserving shares for disadvantaged groups.

55. The employment ramifications of liquidations, in particular, have been high. In Benin, for instance, 3,000 employees of liquidated PEs became unemployed; in Mali, 700 employees have so far been terminated; and in Tunisia, the liquidations to date have involved 1,600 lay-offs. Training and Redeployment funds have been established to softet. the social impact of adjustment (includ'ng divestiture) in several operations. For example, a reinsertion fund has been established under Senegal SAL III to ease the transition of laid-off workers and to provide resources for small-scale projects in agriculture, industry, fisheries, commerce and services. Similar programs are employed in Mali, in Ghana -- where, in addition, divested stateoined land is allocated to retrenched workers -- and Benin. Togo SAL III finances studies of staff reconversion and retraining programs and alternative sources of income and employment such as employee/management repurchase of enterprises through leverage buyouts, and/or lines of credit to assist in the start-up of small businesses.

56. While it is still too early to assess how these have worked (indeed, any assessment goes beyond the narrow issue of divestiture), scanty evidence indicates that such funds, while they may help alleviate the shortterm adjustment problems by providing severance pay and retraining, are likely to achieve little if the overall macroeconomic situation is poor, if the local private sector is small and lacking in dynamism, and unemployment rates are 27 In the privatization of the Port Authority in Malaysia, for example, the workers were given three choices: (i) they could opt to terminate their employment and receive severance pay; (ii) they could opt to join the new company, but remain as employees of the Port Authority; (iii) they could opt to terminate their employment with the Port Authority and become employees of the new company, on terms no less favorable than those currently enjoyed. Ninetynine percent of the workforce opted to join the new company, reducing the Port Authority's payroll by almost 900 workers. At the same time, the new company gained concessions: lifecime job security was no longer guaranteed, and compensation and promotions would be linked to work performance. See Roger Leeds, Malaysia: Genesis of a Privatization Transaction, Harvard University, December 1988.