Privatization in the Global Economy:
Financial and Accounting Linkages for Selected Cases
Conclusions
Privatization began as a matter of ideology, has continued as a matter of necessity, and will be practiced as a matter of standard business operations in the future.
Governments must be clear about their objectives in relation to privatization. They have to determine if their goals are to maximize the sale price, or attract foreign capital and investment, or improve the management and efficiency, or increase the size of their local stock exchange, or make an ideological shift, or the combination of all or part of the above, or maybe others.
Although one of the objectives of privatization is to help reduce the fiscal deficit, governments that are only concerned about the short-term revenues generated by privatization could be wrong if they imagined the process as a fiscal panacea. In practice, privatization objectives are often in conflict requiring trade-offs and compromises. The simplistic approach of fiscal relief is not the correct way of accomplishing a successful privatization. It is important to consider other more meaningful goals like efficiency, competitiveness, and international business confidence.
Evidence suggests that efficiency gains that are needed for improving a country's economic position will only materialize if large privatizations are accompanied by extensive industrial restructuring.
Russia, the other former Soviet republics, and Eastern Europe in general, should have a good look at successful privatization experiences like the case of the United Kingdom (since 1979). They have to learn about their accomplishments and failures, to have a framework of reference and general guidelines and strategies to achieve their own objectives.
The worldwide trend toward privatization offer companies around the world a unique opportunity to expand their international reach.
International accounting plays an important role in privatization, and privatization is also requiring some changes in accounting, especially in regard to the need of harmonization of accounting practices, disclosure of financial and nonfinancial information, valuation of assets and liabilities, translation techniques and performance evaluation.
For privatization programs to be successful, it is ideal to have a good economic environment, especially from the macroeconomic point of view, an open and free economy, open markets, no subsidies, liberalization in all sectors of the economy, good financial climate, a stable currency, appropriate laws for investments, tax incentives, and in general, an environment of economic growth.
