Showing papers in "Journal of International Affairs in 1997"

Privatization and Corruption in Transition Economies

Abstract: "If you think privatization is corrupt, try without it." --Anonymous official, in response to the Ukrainian parliament's decision to halt the privatization program on the grounds of possible corrupt methods (1994) Introduction and Initial Conditions Background The scale of privatization now underway in the transition economies of the former Soviet Union (FSU) and Central and Eastern Europe (CEE) is historically unprecedented. During the decade of the 1980s, about 6,000 firms were privatized throughout the world. During the first half of the 1990s, in contrast, well over 50,000 medium- and large-scale enterprises have been privatized in these transition economies--almost 10 times the number in half the time. Furthermore, these figures do not include hundreds of thousands of small-scale enterprises also privatized in the CEE/FSU region during the period--over 75,000 in Russia, 35,000 in Ukraine and 22,000 in the Czech Republic.(2) The perception has emerged, in parallel with this historic ownership transfer, that corruption has reached endemic levels in the transition economies of the FSU and CEE alone.(3) While empirical evidence is naturally elusive for such activities, some micro-surveys as well as anecdotal evidence--much of it widely reported in the freer press--is suggestive.(4) Moreover, empirical evidence now exists tracing the evolution of the unofficial component of the transition economies.(5) For the FSU, the share of the unofficial economy's contribution to the overall economy (unreported value added as a percentage of GDP) is estimated to have increased almost three-fold over the 1989-1994 period, from 12 percent to 33 percent. Although overall output has contracted sharply during the transition, the unofficial economy has grown significantly, in absolute as well as real terms. While the increase in its share in the CEE countries was smaller, the overall share of the unofficial economy there still exceeds 20 percent.(6) By comparison, similar measures for industrialized countries suggest that in most countries the share of the unofficial economy in GDP is in the single digits or teens. It is reasonable to assume some positive correlation between the relative magnitude of the unofficial economy and corruption in a country, considering the practical necessity of obtaining informal support from government officials for these unreported activities. For example, an enterprise survey of 200 firms in Ukraine and Russia indicates that firms that significantly underreport their activities have also had to make higher extra-legal payments than those that underreport less.(7) Against this background, it is not surprising that privatization and corruption have been perceived as closely linked in the FSU and CEE economies.(8) For these countries, privatization, in its many forms and variations, places a substantial share of the entire wealth of the economy "on the table" for sale or transfer from state to private interests. At the same time, the fiduciary controls that ordinarily operate to ensure that government transactions are fair and transparent have been largely crippled.(9) In this article we examine the relationship between corruption and privatization. Without privatization, the transition economies had no real hope of climbing out of the bankruptcy into which they had been placed by the central planners, with their politically-inspired, monumentally inefficient allocation of resources.(10) At the same time, there is a growing consensus today that corruption has negative effects on the costs of doing business, on aggregate investment, and on growth.(11) Is corruption the inevitable price to be paid for privatization? Where the transition continues, as it must, does broad-based privatization result in greater corruption than where privatization is delayed, partial or absent? Can privatization programs be designed to lessen the corruption that occurs during their implementation? …

Negotiating the CTBT: India's Security Concerns and Nuclear Disarmament

Abstract: ".... [W]hen India and other developing countries proposed the NPT [Nuclear Non-Proliferation Treaty] a global balance of responsibilities was envisaged. Those who did not have nuclear weapons would not seek to acquire them; those who had them would not try to either refine or develop them or to increase their arsenals. This balance was never honoured ..." --Statement by Indian Foreign Minister Pranab Mukherjee, 50th Session of the U.N. General Assembly (New York: October 1995). "Nuclear weapons are making a comeback--not in numbers, but in being.... Countries which previously pressed hard for more nuclear cuts have shifted their focus onto softer arms control issues, such as the Comprehensive Test Ban Treaty and the Fissile Materials ban .... Rather than anticipating further deep reductions, the USA and Russia are solidifying their nuclear weapon stockpiles and consolidating their nuclear weapons infrastructure (which) is being modernised into a smaller, cheaper and more sophisticated maintenance apparatus." --Hans M. Kristensen and Joshua Handler, "The USA and Counterproliferation," Security Dialogue, 27, no. 4 (December 1996) p. 387. India's decision not to sign the Comprehensive Nuclear Test-Ban Treaty (CTBT) in 1996 was based both on its traditional approach to nuclear disarmament and its national security concerns. Yet this decision has often, somewhat reproachfully been viewed by Western critics as a reversal of India's traditional stand on nuclear disarmament, particularly former Prime Minister Jawaharlal Nehru's 1954 call for a halt to all nuclear testing. To understand India's position during and after the CTBT negotiations, it is necessary to review the historical context of our approach. Historical Context While a country's position in arms control and disarmament negotiations is necessarily a product of its political, economic and strategic environment and its national security perceptions, it is equally a product of its unique historical experiences that have determined its fundamental world view. Several political analysts, both Indian and Western, have placed India's security concerns and its approach to nuclear issues in the geographical region of South Asia, or at best, in a region including China. Yet India's promotion of the goal of total nuclear disarmament predates the nuclearization of China and even the emergence of the U.S.-USSR nuclear rivalry For example, as early as 1948, India tabled a resolution in the U.N. General Assembly that noted the then U.N. Atomic Energy Commission's proposal for the control of atomic energy ... for peaceful purposes and for the elimination from national armaments of atomic weapons."(1) The resolution recognized the grave dangers to international peace and security resulting from the absence of effective international control of atomic energy In the years immediately after independence, India's leaders enunciated an ethical approach to foreign policy in general, and to nuclear issues in particular. This reflected deeply held views on global issues adopted by a country that felt it had won a moral victory in addition to its political independence. This approach also reflected a genuine fear of the new weapon of mass destruction. The bombing of Hiroshima and Nagasaki not only provoked moral outrage, it also gave rise to a particular political perception that such a weapon was a new means by which the country's hard-won independence might be threatened.(2) This concern led Nehru to write, in 1954, that "fear would grow and grip nations and peoples and each would try frantically to get this new weapon or some adequate protection from it. Nehru recognized that "a dominating factor in the modern world is this prospect of these terrible weapons suddenly coming into use before which our normal weapons are completely useless."(3) Reacting to a U.S. nuclear test in the Bikini Atoll, Nehru presented to the Indian Parliament what was to become India's declared approach to nuclear weapons: We have maintained that nuclear (including thermonuclear) chemical and biological (bacterial) knowledge and power should not be, used to forge these weapons of mass destruction. …

Privatization and Political Theory

Abstract: Introduction If any economic policy could lay claim to popularity, at least among the world's political elites, it would certainly be privatization The policy first gained significant public notice during the early 1980s when Britain's Prime Minister Margaret Thatcher was in office Soon after this, the conservative governments in North America began trumpeting the value of shifting public responsibilities to private actors Under the prodding of the World Bank, governments of developing countries also began experimenting with various forms of market reforms, if not outright sales of most public assets The dramatic collapse of communism beginning in 1989 led to a widespread interest in privatizing state assets throughout the former socialist world To better describe this broad tide of liberalization, we use the term privatization to include any initiative that increases the role of the market in areas previously considered the province of the state (national or local) This includes not only the sale of state assets, but deregulation and contracting-out of public services to private providers(1) If one considers privatization under this broad definition, no part of the world has been unaffected by this process This widespread privatization phenomenon requires explanation While it has become the province of economists to explain what should happen, historians and political scientists try to explain what did happen Like most issues of social science, it is unlikely that all will agree on a single explanation for this global trend However, the purpose of this article is to sketch out the potential explanations Since all explanations have underlying implicit and explicit assumptions, we attempt here to trace out the variations in rationale offered by contrasting approaches Broadly we find that the approaches reviewed are useful, but ultimately inadequate We argue that privatization is based on historical circumstances; no single set of phenomena can adequately explain the drive to privatize Economic theory has not offered much in the way of understanding privatization Neoclassical economics has tended to assume that private, unencumbered markets are the "natural" condition of human exchange The appearance of state intervention, on the other hand, requires justification Traditionally, such intervention is justified in the event of market failure Market failures are found in sectors where entry costs are so high that they lead to natural monopolies, in sectors where externalities are significant and in areas where consumers cannot be excluded In the words of Adam Smith, state intervention provides goods and services that "though they may be in the highest degree advantageous to a great society, areof such a nature that the profit could never repay the expense to any individual or small number of individuals"(2) But rudimentary notions of market failure are insufficient to explain the timing or volume of privatization in the last two decades, or the growth of public sectors in the first place Fortunately, political science offers a rich variety of theory that can be used to explain the trend toward privatization It is our assumption that privatization can best be understood as the opposite of state growth States have developed for a number of reasons, and we believe that explanations for state growth offer a clue to understanding privatization Unlike economists, who are largely united in their shared philosophical assumptions about how one understands the world, political scientists are divided Economists tend to believe that theories can be objective and applicable to different societies and historical eras Moreover, the proper building block of a theory is the rational individual Political scientists cannot reach a similar consensus Those who agree with the economists are labeled "liberals"(3) In contrast to liberals, Marxists emphasize that theory is always value-laden and that an individual's behavior is influenced primarily by social class …

Methods of Privatization

Abstract: Privatization has been in fashion for more than 15 years, if we date its recent flowering from Margaret Thatcher's initiatives in the late 1970s. Shrinking the state's economic presence became part of the economic reform programs that characterized economic policy throughout much of the world in the 1980s. The collapse of communism in Eastern Europe and the former Soviet Union (FSU) moved privatization issues onto a much larger stage in the 1990s. Privatization in the broadest sense means giving private actors a greater role in decisions about what, where, and how to produce goods and services. A great deal of experience has now accumulated regarding this process. Some of it shows the great potential that privatization has for increasing productivity, income and welfare.(1) However, it also reveals the complexity and difficulty of effective privatization. Privatization even in the narrower sense of "divestiture"--the sale of state-owned enterprises (SOEs)--has presented greater challenges than its early advocates envisaged. Relatively few countries account for most of the divestiture activity in recent years. Thus, of the roughly $300 billion in divestitures between 1988 and 1994, two-thirds occurred in industrial countries. (This excludes sales of small enterprises and give-aways such as "mass privatization" programs.) The five biggest privatizations--among them Japanese Railways, British Telecom, and Deutsche Telekom--account for some $60 billion in proceeds. Of the $100 billion in developing country privatizations, more than half took place in Latin America.(2) In developing countries, macroeconomic impacts of privatization activity have been small in most cases. Despite the widespread privatization rhetoric and many formal structural adjustment programs under World Bank sponsorship, the average public enterprise sector share in gross domestic product for 40 low- and medium-income developing countries between the late 1970s and the early 1990s remained unchanged, as did the sector's share in wage employment.(3) In the low-income developing countries (those with average per capita incomes below $600 a year) the pace of privatization has been particularly slow. In sub-Saharan Africa, for example, only 1800 (mostly small) divestiture transactions took place between 1980 and 1995, with a sale value of about $2 billion. In only six countries (Benin, Ghana, Guinea, Mozambique, Nigeria, South Africa and Uganda) did total sales through 1995 amount to more than $50 million, which suggests insignificant reductions in the relative size of the public enterprise sectors in most of the continent. Ghana, Nigeria and South Africa account for almost 70 percent of the total sales value of African privatizations.(4) Overall progress has been much faster in Eastern Europe and the FSU. Most of these countries have succeeded in moving from almost complete domination by the state sector to predominantly private economies.(5) However, only a few of these countries have been able to divest many state enterprises to new managers, and the problem of using former state assets more efficiently remains problematic in much of the region. Many factors enter into the explanation of these patterns of privatization. In this paper, we focus on only one of these: the relationship between methods or techniques of privatization and the objectives that governments seek to attain through privatization. This has two related dimensions: the fit between method and objectives, and the incompatibilities between various objectives. The main objectives, explicit or implicit in most privatization programs, are: fiscal relief by cutting government subsidies to money-losing SOEs and/or by generating new revenues from their sale; increased enterprise efficiency; increased efficiency of the entire economy through more competitive markets and better allocation of resources across firms and sectors; increased political support and broadened institutional underpinnings for a market-based economy or further liberalization; stronger financial markets; increased investment and the stimulation of entrepreneurship. …

Privatization: A Case Study in Corruption

Abstract: The current era of privatization, conceived and begun by Britain's Thatcher government, was borne of a political movement opposed to statism. For over a decade, privatization has been a critical ingredient of the free market agenda that assumed the private sector would create more efficient companies than the government. Not surprisingly, the potential for corruption in privatization was ignored in the ideological zeal of the times and, for a variety of political and economic reasons, has continued to be downplayed in the very countries where it is so rampant. Now, however, a surge in corruption in many, if not all, of the privatization programs in the developing economies of countries like Russia and the former Soviet satellites has forced the issue to the forefront. The high costs of corruption are both economic and political. Unscrupulous privatizations have cost countries such as Russia, India and Mexico billions of dollars in bailouts and other state-absorbed losses, which have contributed to inflation and have slowed, if not halted, on-going economic transformation. Communists and extreme nationalists around the world exploit the rampant corruption in their countries to win converts and attempt to unseat governments. In the end, corruption in privatization threatens to undermine the very market economics that privatization programs were designed to promote. To illustrate the issues raised by corruption in privatization, this essay will first address some of the reasons why privatization is so susceptible to corruption, then look at a variety of countries--including Russia and the former communist bloc countries, along with India and Mexico--to show some of the corrosive economic effects of corruption in privatization and the political dangers accompanying it. One of the biggest problems developing countries face is pressure from multilateral institutions, such as the International Monetary Fund (IMF) and the World Bank, to privatize as part of their market transformation and as a prerequisite for financial support, long before they have the independent regulatory, legal or judicial framework in place to effectively stop corruption. Only after serious problems surfaced in countries such as Mexico and Russia have multilateral institutions finally begun to recognize that these structural reforms are critical to the economic transformation to capitalism.(1) The absence of governmental regulatory systems makes the privatization process a hotbed for corruption. Because state enterprises do not practice the same type of rigorous commercial accounting and valuation of assets as do private companies, transforming their books to meet the standards of the marketplace--where the value of assets is likely to decline when competition is introduced--is always a complicated process that leaves great room for interpretation.(2) This difficulty in determining the market value of state assets creates a margin that can easily be filled by bribes. Moreover, even if governments engage in a competitive bidding process for the sale of their assets, as is often required by the multilateral institutions, bids are generally confidential, and the power to make the final decision usually lies in the hands of an individual minister.(3) Thus, the rules are only as good as the political environment in which they exist. Countries with a long history of corrupt governments will also be likely to engage in corrupt privatizations. To compound the problem, in many instances, even those countries where anti-corruption laws exist, deeply ingrained customs legitimize practices such as bribe-taking or insider dealing. Pakistan, for example, has anti-bribery laws, but they are routinely ignored. Before the recent fall of the government of Benazir Bhutto on corruption charges, World Bank consultants reported being stymied in their attempt to bring competitive bidding practices to the country, because paying bribes was seen as an extension of the tradition of giving presents to tribal chiefs to "make sure things get done. …

Ideological Motivations of Privatization in Great Britain Versus Developing Countries

Abstract: Privatization is one of the most significant worldwide economic, social and political phenomena of this and the previous decade. It has become the new economic mantra and will continue to exert influence on the lives of people in countries throughout the world well into the next century.(1) Understanding what privatization is, how it works, its prevalence and the ideas and doctrines which underlie it is essential for politicians, government officials and their advisors who are considering adopting, or are currently managing, privatization programs. This paper begins by tracing privatization's growth during the 1980s and 1990s and then reviews the history of nationalization, exploring its underlying ideology, as an antecedent to the initiation of privatization in the United Kingdom and developing countries. The discussion of nationalization in the United Kingdom and developing countries provides the context for why these nations adopted privatization as a key element of their economic reform programs. Finally, the paper explores the objectives, ideological motivations and results of the United Kingdom's privatization program and those of privatization programs in developing countries. This research should provide insight into why privatization has been so widely adopted by many types of governments throughout the world. It also may be valuable in providing fledgling privatization programs with useful information based on the experience of Great Britain and the developing countries. The most important distinction between the privatization programs in the United Kingdom and the developing countries is ideological. The ideological motivations of the United Kingdom's privatization program are based primarily on the tenets of neoliberalism. In developing countries, privatization programs are based primarily on pragmatic considerations. This may help explain why the objectives, techniques and results of these privatization programs sometimes differ. Privatization as a Global Phenomenon of the 1980s and 1990s Although little-known before the British government popularized it in 1979, privatization is now ubiquitous. The widespread acceptance and use of privatization throughout the world is, in part, a function of the economic reform occurring in Asia, Eastern and Western Europe, Africa and Latin America. Countries in these regions are attempting to encourage entrepreneurial activity, promote the development of free-market economies and build sustainable economic growth. In addition to economic reform considerations, other factors have contributed to privatization's widespread application, including: the generally held belief that privatized industries operate more efficiently and economically than their publicly owned counterparts and are more responsive to consumers; the desire of many elected officials and their constituents to reduce the size and scope of government and the reluctance of citizens to fund regular tax increases in order to support the operation of publicly -owned enterprises. Before the government of Prime Minister Margaret Thatcher adopted privatization as a key element of its economic program, the practice was implemented only occasionally in the United Kingdom. For example, in 1951 the Conservative government privatized parts of the steel industry that had been nationalized by the previous Labor government.(2) In 1970, government-owned travel agencies, a brewery and several public houses (pubs) were sold by the government led by Conservative Prime Minister Edward Heath.(3) In 1977, the Labor government sold a small portion of British Petroleum in order to limit public spending reductions made necessary by the terms of the United Kingdom's 1976 International Monetary Fund loan.(4) A limited number of privatizations also took place in other countries, including Chile, France, Ireland, Italy and West Germany during the 1960s and 1970s. …

Whose Independence? the Social Impact of Economic Reform in India

Abstract: Introduction 1997 is the 50th year of India's independence, an appropriate time to critically assess the social, cultural and economic condition and independence of the country. Viewed from the wide boulevards of its cities, India seems to be thriving. There is an undisputed increase in GDP and the growth rate of the economy and the urban markets appear to be flourishing. Not, however, with the vast diversity of available indigenous products, but increasingly with a plethora of middle class consumables--from kitchen gadgets and washing machines to the latest stereo systems and cars. Over 20 channels of television with a staggering array of national and international programs are beamed into millions of homes. Cellular phones and domestically-assembled Mercedes-Benz cars have become the new status symbols. Behind the facade of these superficial symbols of consumption, however, lies a story of increasing disparities: a rise in under- and unemployment; a deterioration in the livelihoods of a majority of the population; an increase in critical poverty; a decline in the membership of trade unions; and a phenomenal increase in the number of workers in the informal sectors of the economy and in the extent of the irregular employment. Additionally, there has been an intensification of rampant corruption, particularly by political and economic elites; a staggering increase in environmental degradation in both urban and rural areas; loss of genetic bio-diversity; and growing social unrest arising largely out of greater immiseration.(2) At the same time, there has been an increase in dependence upon international capital and multilateral and transnational institutions, resulting in a critical loss of control--not just by producers, but by the country itself. This article explores this dualism by looking critically at the impacts of the new package of economic reforms on India's social and ecological diversity, on the livelihoods and lifestyles of a majority of the people, on the political trends that seek a more rapid "integration" into the global marketplace and on the capacity of the country to build a pattern of social and economic development that is in consonance with the deepening of democracy; the widening of social justice and the sustainability of the environment. Background Industrialism, Planning and Equity in the Post-independence Period For almost four decades after independence in 1947, India managed to keep largely out of a debt trap, although this post-independence period arguably witnessed the planting of the seeds of economic dependency and debt through industrialization, militarization and a move to a chemical input-based agriculture. After the prolonged struggle for freedom throughout the late 19th and early 20th centuries, widespread aspirations for social and economic justice impelled a constitutional and planning process that initiated a series of dramatic social reforms during the 1940s and 1950s--the abolition of zamindari (landlordism), the introduction of the reservations system (affirmative action) for scheduled castes and tribes and investment in telecommunications, basic industries and infrastructure.(3) Unfortunately, the colonial structures of administrative control were left relatively intact, as were the structures of private property. Even the educational system retained its colonial legacy. Dramatic social reform policies thus went hand in hand with structures and institutions that perpetuated power and privilege. For example, in keeping with the government's formal commitment to greater social and economic welfare, the first Five Year Plan initiated by the first independent government in 1950 retained a strong dimension of equality with an emphasis on agriculture and on cottage, small- and medium-sized industries. At that political and economic juncture, the policy of achieving self-reliance through import substitution and through appropriate trade barriers to protect domestic production from being swamped by powerful foreign and corporate interests seemed to be a prudent and judicious strategy. …

Congress Decline and Party Pluralism in India

Abstract: The Indian National Congress party was founded in 1885 to petition the British government in India for administrative and political reform Under British rule, the Congress gained experience in contesting elections and in governing at provincial and municipal levels In the 1920s, Mohandas Gandhi reorganized the party, which helped it to evolve into one of the world's largest membership-based, mass organizations Principled and well-organized resistance to British rule confirmed the Congress as the party of Indian national independence As the Second World War weakened Britain's colonial grip, the Congress was invited to take charge of the central government, almost a year before independence in August 1947(2) The Congress has been the party in government at the national level, or the center, for all but six years since India's independence, 50 years ago(3) Today, however, the Congress is out of power and, for the first time since independence, it is not the party with the greatest number of seats in the Lok Sabha (People's Council), the popularly elected house of Parliament(4) The Hindu nationalist Bharatiya Janata Party (Indian People's Party) occupies the largest block of seats Twenty-eight parties are represented in Parliament, the largest number in independent India's history A coalition of 13 regional and left parties, the United Front, presently governs at the center(5) The Indian National Congress has been the most important institution in India's modern political development The Congress, a favorite example of a dominant party in a competitive party system, was thought to be the backbone of the developing world's best institutionalized democracy(6) Today, the Congress is seemingly in advanced stages of decline Each of the non-Congress parties, including those presently in government at the center and in most states, represent more focused interests than the Congress can seemingly retain Moreover, many suggest that the Indian political system is being destabilized by rising social unrest and institutional decay(7) That sentiment is buttressed by the increased electoral support to the Bharatiya Janata Party (BJP) in past parliamentary elections and in a number of significant state assembly elections(8) Some have cautioned that the new social forces and popular demands that have lead to religious revivalist and to caste-oriented parties cannot be accommodated in a parliamentary democracy The leadership, constituencies, issues and electoral strategies of political parties have undergone significant change in the 50 years since independence in India Do these changes, most notably the decline of the Congress, signal the arrival of more pluralist politics in India? To advance upon this question, this essay comments on the evolution of the Congress within the Indian political party system(9) A brief assessment of the reasons for and the depth of the Congress's decline suggests that the Indian party system is neither in the midst of systemic crisis of governance nor endangered by religious revivalism Emergent forms of electoral appeals and political contest may not quite conform to the theoretical postulates of pluralism, but as the Indian electorate has broadened, the Indian Parliament and India's more than two dozen state assemblies are becoming more representative of Indian society as a whole, including its caste, class, religious and other social cleavages Congress Dominance The Congress ruled continuously at the center and in most Indian states, from the first general election in 1952 until the 6th general election in March 1977 The party has retained power at the center more often than not since However, the Congress has been dominant not by virtue of its command of an undemocratic electoral system but rather by virtue of its depth of leadership and its organizational capacity Although the Congress had been the dominant party, it has not attempted to make itself into an organization with an exclusive claim to governance, as have Mexico's Partido Revolucionario Institucional (Institutional Revolutionary Party) and Indonesia's GOLKAR …

Gender Bias and Family Distress: The Privatization Experience in Argentina

Abstract: Introduction The intention of this article is to examine structural adjustment and the particular impact of privatization on the lives of women and families. Although privatization is occurring on a global scale, this study draws conclusions specifically from the Argentine case. In doing so, it intends to ask the following questions: how did the process of privatization in Argentina affect the situation of women? Which women were most affected? Were women affected differently than men? Have changing economic conditions--in which privatization plays a strategic role--elicited new strategic responses from families? Structural adjustment in Argentina began in the mid-1970s. Since that time, adjustment in Argentina--as in Latin America in general--has resulted in a deterioration of living conditions for a significant proportion of the population. The failure of several economic programs during the late 1980s prompted the government to begin implementing privatization in 1991. Privatization produced some economic benefits, but also exacerbated the falling standard of living, with significant sociological consequences.(1) Rising unemployment, falling real salaries (especially those of male breadwinners) and a general spread of poverty have resulted in major changes in family roles and dynamics, including shifts in women's domestic and economic roles that force them to devote an increasing amount of time and effort toward their productive tasks in addition to their reproductive tasks.(2) Due to their central role in the management of family resources and administration of the household, women face major challenges as family incomes shrink(3) and formerly public social services become increasingly expensive and inaccessible.(4) At the same time, the tenuous employment conditions of male heads of households have forced many women into the labor market, where most face poorer working conditions and earn lower salaries than men.(5) In this context, increased labor participation by women from the lower and middle social strata should be understood not as an option for individuals to pursue personal growth--an argument better suited to a minority of highly educated, upper-middle class women--but rather as a survival strategy among families threatened by poverty.(6) To provide further context for these issues, the first section of this article will review economic trends of the last two decades, focusing on major changes in the labor market of the Buenos Aires metropolitan area since the new economic program began in 1991.(7) The second section discusses the effects of these changes on Buenos Aires' women and families, including some of their major adaptive responses to economic hardship. The third and fourth sections are devoted to an analysis of some specific characteristics of privatization efforts within several major enterprises and their quantitative and qualitative effects on employment and working conditions, especially within the two privatized enterprises with the biggest share of female employees. Finally, some concluding remarks draw out specific policy-oriented conclusions. Several thorough case studies explore the sociological effects of privatization on Argentina's manufacturing and extractive industries, which mainly employ male workers. These studies are similar in that they all stress the changes in family roles and dynamics that have occurred as a consequence of male unemployment following privatization, and female compensation for the lost income.(8) However, there are no systematic studies that quantitatively assess the specific effects of privatization on total employment in Argentina or its major metropolitan areas. Neither are there studies dealing with the effects of privatization on women employees, nor available statistics that dissagregate employment in privatized firms by gender. This statistical failure parallels the fact that changes within newly privatized firms, although not deliberately directed against women, frequently result in gender biases against female employees by simply ignoring gender asymmetry. …

Contracting out as a Vehicle for Privatization: Half Speed Ahead

Abstract: Privatization in its broadest sense entails a simultaneous retrenchment of the government sector and an expansion of the private sector. Although privatization is often thought of as synonymous with government sales of state-owned enterprises (SOEs), divestiture is far from the only privatization option. In the former Soviet bloc countries, for example, the rapid growth of newly-formed private businesses has reduced the public to private sector ratio, even though the sale of the many state-owned industrial behemoths has proceeded at a snail's pace. Liquidation of obsolete and uncompetitive government production units also has reduced the relative importance of the public sector. Similarly, the government's reach can be cut back by contracting out its functions to the private sector, replacing public production facilities and employees--though not ultimate responsibility--with private sector counterparts. This article contends that while contracting out or outsourcing can be an invaluable component of a privatization program, it needs to be implemented judiciously. The pragmatic case for turning over government activities to private organizations rests primarily on the consequent savings; the public sector benefits by capitalizing on the private sector's presumed greater efficiency. The government sector, however, is not always less efficient. Moreover, even when the superiority of private enterprise is evident, contracting out is not always the less expensive alternative when all costs are fully allocated. Hence, a case-by-case analysis must replace crude generalizations of questionable merit. The first section of this article examines the overall appropriateness of government contracting out: what types of government activities are good candidates? It also explores some noneconomic motives used to legitimize outsourcing services that were long thought to lie solely within the realm of government. The second section considers issues that ought to be raised by government authorities contemplating contracting out. This article then examines the growing practice of outsourcing infrastructure projects known as Build-Operate-Transfer (BOT), which resolves many of the questions that arise in the contracting context, but which raises some of its own. The penultimate section examines open competition, whereby in-house suppliers are permitted to compete with external contractors. The final section concludes with a few observations generated by the concepts and examples embedded in the article. Candidates for Contracting Out Downsizing is hardly a welcome activity either for the political authorities, especially ministers whose fiefdoms are shrunk, or the civil service whose members lose influence if not employment. Yet even though the case for reducing government intervention in the economy is often warranted, the implication that this be accomplished through divestiture is not always compelling. Thus, while it is not difficult to justify the sale of an SOE that survives only through subsidies or special regulatory advantages, such arguments would not apply to divesting a government company that holds its own in the marketplace. Similarly, the rationale for converting a monopoly SOE into a private monopoly is far from obvious, especially when the regulatory apparatus is itself undeveloped or underdeveloped.(1) Furthermore, selling SOEs is not always possible; their potential profitability may be so uncertain as to induce apathy among prospective private owners. Although the government might just eliminate such operations, non-economic goals often overrule the adverse budgetary impact, at least for a while. Finally, some governmental activities, such as formulating laws or appointing judges, are by nature non-commercial and are obviously dubious candidates for removal from the government ownership rolls. Yet, the efficiency of SOEs and non-commercial public activities can be improved even when divestiture is either ruled out or delayed. …

The Czechoslovak Experience with Privatization

Abstract: In 1991, privatization was launched in Czechoslovakia in a relatively stable macro-economic environment.(1) Unlike a number of other post-communist countries, Czechoslovakia did not have to face a disrupted domestic currency or increasing budget expenditures.(2) What would become the Czech Republic boasted a very small budget deficit, representing 0.6 percent of its Gross Domestic Product (GDP). This compares with deficits of up to 2.2 percent of GDP for the future Slovakia, 2.2 percent for Hungary and 3.8 percent for Poland.(3) This was an important factor which made it much easier for Czech political leaders to effect economic reform in the areas of price liberalization, the devaluation of the Czechoslovak crown (Kcs) and the tax system. Czechoslovakia was considering several strategies for economic transformation in 1991. Czechoslovak economists and political leaders were relatively familiar with traditional privatization techniques such as direct sales or public tenders, and they quickly concluded that such techniques and programs were not applicable in the Czechoslovak context. When economic transition began in Czechoslovakia in the summer of 1990, Czechoslovak leaders took a unique approach to the problem of privatization and decided to initiate a mass-privatization program, using traditional privatization techniques only marginally. The mass-privatization scheme became the centerpiece of Czechoslovakia's privatization objectives and represents the main innovation of the privatization process. By distributing vouchers which could be exchanged for shares in state-run companies to the public and funneling them through investment funds, the Czechoslovak government sought to transfer a large number of state-owned firms to the private sector as quickly as possible. In the eyes of the government, this plan also had the advantage of overcoming the problem of private businessmen only having small amounts of savings available for purchases of state assets. In the first part of this article, I will present in more detail the strategic considerations faced by Czechoslovak leaders in 1991. I will also discuss how the government made the decision to choose a privatization program that put an emphasis on the speed and volume of transfers of state property to the private sector. In the second part, I will present the main characteristics of the Czechoslovak mass privatization program and the successive steps undertaken by the government to create broad public support for the privatizations through a strategy of small-scale privatization and restitution. Finally, I will explain why the government was compelled to introduce traditional public auctions and direct sales simultaneously with the voucher program. Strategic Considerations for Czechoslovak Privatizations in 1991 At the outset of the economic transition, the Czechoslovak authorities developed an original approach to the privatization of large state-owned enterprise. The primary assumption underlying their approach was that the methods of privatization traditionally implemented in industrialized countries, such as direct sales and public tenders, could play only a marginal role in the Czechoslovak context. Several factors were instrumental in the Czechoslovak authorities' decision to reject traditional privatization techniques and adopt a mass privatization program. The first significant element behind this skepticism over the applicability of traditional privatization procedures was the environment and climate in which privatization was to be performed. The Czechoslovak privatization was expected to create the prerequisites for restoring the role of market forces in the economy. Czechoslovak leaders believed that market mechanisms had to be created first in order to develop conditions for better performance in state-owned industries. This was radically different from the context in which British privatizations were undertaken in the 1980s. …

Retreating from the Commanding Heights: Privatization in an Indian Context

Abstract: The question today being asked [regarding the public sector] is commanding heights of what? Red-tapism. Inefficiency. Absurdity. Antiquity....There is no alternative to a thorough-going privatization. --S. Pandey (italics original) The idea of transferring the ownership from public sector to private sector for India is too immature, rather wrong...the state is more knowledgeable and objective and the market is imperfect and short-sighted.(1) --K. Das Overview In the period between 1988 and 1993, about 2,700 state-owned enterprises (SOEs) were privatized in 95 countries, excluding large-scale voucher privatizations.(2) By 1995, the total value of privatization deals exceeded $300 billion. None of these major deals have been in India. There are two main reasons for this. First, in contrast to former communist countries, the government controlled less of the economy, meaning there was simply less to sell. Second, India's open political system has meant that the strong sentiments aroused by the issue of privatization--exemplified by the quotes above--have tended to cancel each other out, reducing the incentive for elected officials to act. Up until now, India has pursued a unique approach that I call "parallelization." This includes encouraging the development of private sector competition for state-owned firms--known as Public Sector Undertakings (PSUs) in Indian parlance--while at the same time slowly establishing independent regulatory agencies to oversee the newly established players. However, a realignment may be taking place. The once dominant Congress Party, after a strong challenge by the Bharatiya Janata Party (BJP), has been replaced in government by the United Front, made up of regional and left-of-center parties that exclude both the BJP and the Congress.(3) This may allow for further evolution of privatization policies. Parallelization is not the result of a premeditated, publicly articulated strategy. Instead, the term describes a bureaucratic response to multiple and contradictory pressures: low returns from SOEs, lack of funds for modernization, inability to fire workers, and demands from consumers to improve service. Nonetheless, it has helped India avoid the pitfalls faced by privatization programs in other emerging economies. Creation of private-sector employment alternatives allows for the gradual absorption of workers from overstaffed SOEs and lays a foundation for future sell-offs. Rapid growth in sectors formerly monopolized by the government means that labor, a potent opponent of privatization efforts worldwide, may eventually be co-opted by the availability of higher-paying opportunities in the private sector. Controlling the pace of private-sector involvement allows time for regulatory institutions to mature. These developments will in time emphasize the superfluity of SOEs to the Indian economy. This in turn will make it more politically acceptable to use proceeds from full denationalization to contribute to eliminating the fiscal deficit (at least in the short term) without making drastic cuts in social services. Denationalization vs. Parallelization It is important to define what is meant by the term "privatization. The International Finance Corporation (IFC) notes that, ...a generous stance would admit any transfer of ownership or control from public to private sector. A more exacting definition would require that the transfer be enough to give the private operators or owners substantive independent power. This will often though not always imply majority ownership. Transfer techniques can include trade sales to a strategic investor, public offer, closed subscription, joint venture, liquidation, concessions, auctions, voucher or certificate based transfers, employee or management buyouts, or most combinations of all of these. …

Tales from Two Privatizations: Russia and the Former East Germany

Abstract: Introduction: Microeconomic Analysis The transition from a centrally planned to a market economy currently taking place in Eastern Europe and the former Soviet Union is complex and difficult to understand, both for individuals actively involved with the local changes and for those viewing it from the outside. The scale of the problems faced by the governments of countries in transition is often underestimated by policymakers who raise expectations of economic growth in short time periods. Statistics based on macroeconomic data often show that transition results, especially in privatization of industry, are rapidly approaching levels of Western economies. However, "hands-on" microeconomic information illustrates the persistent underlying problems of economic transition. Macroeconomic statistics can present a picture of overall economic success while concealing failures in large segments of the economy as many individual companies continue to struggle with the transition. Macroeconomic information makes intercountry comparisons difficult for several reasons, including the limited reliability of data, both historic and current. The historical, demographic and geographic differences among the countries of Eastern Europe and the former Soviet Union are as vast as the differences among the approaches used to undertake the economic reforms. Diverse backgrounds and approaches within Russia, where the collapse of central control has spawned a large number of independent regional and local authorities, further complicates macroeconomic analysis. For these reasons, analysis of individual privatization cases can be used to identify problems of the transition and pin-point the progress of and limits to economic reform. Almost seven years after the beginning of the Eastern European privatization, a large number of macroeconomic statistics are now being evaluated to determine the level of success of the transition from planned to market economies. Gross national product, unemployment, real wages, foreign investment and cost of living indices show a wide range of results from the various privatization programs throughout the former planned economies. Two of the most diverse examples of privatization are Russia and the former East Germany. In both cases, macro statistics show a picture of progress towards a market economy. However, after five years of working on the microeconomic level with companies in both countries, it is apparent to me that privatization policy shortcomings overlooked by ministries in Moscow and Berlin persist in both countries. From the following cases, four key factors for success in privatization can be identified. Two macroeconomic factors stand out from my work as playing a vital role in economic transition: 1) maintaining a stable economic and legal system and 1) patience and support from the West. However, the focus of this paper will be on the two microeconomic factors: 1) general management skills and adaptation to Western business practices as well as 2) accountability and an understanding of the importance of accurate financial information. The Economic Transition: Macroeconomic Context In 1989, East Germany's communist government quickly disappeared. Similar to the Wirtschaftswunder (economic miracle) in West Germany after the Second World War, the instant economic and political transition facilitated by funds of almost $700 billion occurred without significant internal resistance. (1) This high level of investment in East Germany is often neglected when comparing privatization results. Other factors were at least as important as the massive transfer of funds. Perhaps most significant of these was the adoption of a stable constitution and legal system. Federal subsidies to companies ranging from environmental clean-up to funding depleted pension accounts helped make investment palatable to Western firms. For individual companies, a clearly defined set of business rules and legal stability, from contracts to tax law, were also very important. …

Local Control versus Technocracy: The Bangladesh Flood Response Study

Abstract: Introduction Since 1947, development planning in South Asia has evolved into a battleground between alternative visions of society; government and human. Is democracy a luxury only wealthy nations can afford, or the best way out of poverty? Does development depend primarily on introducing technologies, or on building institutions? Is it a matter of injecting large amounts of capital, or of building systems of effective management. Does it require greater central control or more local organizational capability? Do low educational levels and general poverty require that development priorities be decided by an administrative or technocratic elite, or does control by an insulated elite assure low levels of general education and continuing poverty? In Bangladesh, conflicting answers to such questions frame the opposed positions in a life-and-death argument concerning the problems posed by the annual cycle of winter droughts, cyclones, spring storms and summer floods. Although the climatic cycle constrains and supports virtually all productive activities, it also regularly causes tens of millions of dollars of damage and take hundreds and sometimes thousands of lives. Since 1988 most of this discussion in turn has focused on the Flood Action Plan. There is no better example than the Flood Action Plan of the ways development plans in South Asia are repeatedly distorted by the concerned national and international agencies, to the point that they perpetuate the poverty and dependency they should be working to end. In 1987 and again in 1988, particularly disastrous floods were followed by insistent public demands that the government of Bangladesh should "do something," but there were no mechanisms by which the public could refine this demand into specific proposals. However, donor governments and agencies expressed a willingness to help. In 1988, Danielle Mitterand, the wife of Francois Mitterand, then-president of France, visited Bangladesh's flooded areas. Shortly thereafter the French government submitted a proposal to the Bangladesh government to construct a prototypically centralized, capital- and technology-intensive solution: a comprehensive System of embankments to contain all the major rivers. The French did not, however, offer the necessary funding. According to a preliminary study, cited by the World Bank as a "pre-feasibility" analysis, the cost was expected to run between $5.4 billion and $10.2 billion, followed by annual maintenance expenditures ranging from $540 million to $890 million.(2) Social costs, according to the study, would include, "expropriation of 19,000 to 21,000 hectares that would affect up to 180,000 people." In addition the study noted that, "in the large set-back solution, about 5 million people living between the main embankments and the bank would not benefit from flood protection and might have to be relocated behind the shelter of the dykes."(3) In other words, 5 million people would be displaced as a result of the French flood prevention plan. The expected benefits of the French plan were the reduction or elimination of annual losses caused by floods that presently cost about $140 million, as well as unspecified "agricultural benefits, including improved cropping patterns, and a likely improvement in the rate of growth."(4) Although not explicitly stated, the implication was that such benefits might eventually outweigh the costs. However, there are many reasons to doubt this. The existing agricultural system in Bangladesh is closely adapted to the cycle of inundations and is unquestionably productive, supporting one of the highest rural population densities in the world. No rain-fed system and few irrigation system could achieve as much. Funding for the French proposal proved elusive. The apparent expectation was that a large part of the expense would be covered by Japan or the United States. However, neither country was inclined to agree. …

Anarchy in Afghanistan

Abstract: Almost 20 years of war have shattered Afghanistan. Today e country is divided into several hostile fiefdoms and anarchy reigns in much of the countryside. Putting back the pieces has been difficult, and the prognosis for peace in the immediate future is bleak. Although Soviet meddling sparked the conflict in 1978, their withdrawal in 1989 did not end Afghanistan's woes. Instead, war, anarchy and fragmentation followed the Soviet withdrawal, as fighting continued against the Soviet-installed Najibullah government. Mohammed Najibullah's overthrow in 1992 finally brought the anti-Soviet resistance groups--called the mujahedin--to power, but still the war did not end. Without the glue of a common enemy, the mujahedin turned their guns on each other in a brutal civil war. Peace remains an unlikely prospect in the near future because no Afghan group has been able to impose its will on the other factions. In addition to disagreement among the various factions over the division of power, constant competition among outside states for influence has also destabilized Afghanistan. Indeed, if anything, competition among regional powers has become more intense after Kabul's takeover in September 1996 by the Taliban guerrilla group. The conflict in Afghanistan has deep social and political roots. But the immediate factors responsible for the fighting are the fragmentation of power during the years of resistance to the Soviet Union and increased ethnic tensions. The most desirable outcome for the civil war would be: an agreement among the warring factions on a cease-fire; the establishment of a broadly acceptable interim government; the disarming and integration of the various militias into a national army; the reconstruction of the country's economy; the resettlement of refugees; and the reestablishment of civil society and the rule of law. Peace in Afghanistan also requires that its government pursue good relations with all its neighbors. Afghanistan's neighbors, in turn, would have to abandon plans for hegemony. For such a settlement to take place, greater international support--especially American--for a negotiated settlement is vital. Unfortunately, efforts at promoting peace have been half-hearted. No serious attempts have been made to develop a true international consensus in favor of a political settlement or to deal with the issue of the multiplicity of armed forces backed by rival regional powers. Nor has there been any effort to punish factions opposed to peace. This article analyzes both the internal and external factors contributing to the continuation of the civil war and assesses future prospects for stability in Afghanistan. It concludes by identifying the conditions conducive to promoting peace in this wartorn country. The Causes of Anarchy in Afghanistan Afghanistan's anarchy has two sets of causes: domestic and international. At the domestic level, Afghanistan's ethnic and tribal politics have long contributed to instability. The largest ethnic group in Afghanistan, the Pashtuns, are divided into many tribal confederations with major inter-tribal rivalries, especially between the Durranis and the Ghelzais. Some, especially those living in or near Kabul and Herat, were Tajikized (Persianized)--that is, their mother tongue changed from Pashtun to Dari (Afghan Persian). For much of Afghanistan's recent history, the Pashtuns produced the Afghan monarchs and dominated the military arid the bureaucracy. Among Afghanistan's other main ethnic groups, the Tajiks participated more in running the country than the Uzbeks or Hazaras. The Hazaras in particular were disenfranchised and impoverished. They were forcefully brought under central control in the 1880s and 1890s.(1) Afghanistan has also been the scene of great power rivalry. In fact, the borders of what is now Afghanistan came about as result of the rivalry between the Russian and British empires. …

Financing Women Entrepreneurs in South Asia: A Conversation with Nancy Barry

Abstract: Nancy Barry is president of Women's World Banking, a nonprofit organization that seeks to expand low-income women's access to capital. Based in New York City, Women's World Banking has affiliates around the globe that provide credit, savings and development services to the bottom 50 percent of the economically-active population. In South Asia, Women's World Banking has affiliates in India, Nepal and Bangladesh. Typically, these affiliates provide small loans to women to start micro-businesses. The ultimate goal of Women s World Banking, says Barry, is to increase the political and economic power and participation of poor women. Journal: Do your loans lead to a change in the power structure among men and women? Barry: There is a shift in the power dynamic at the household level. Money is power. Most women say the reason they need a Self-Employed Women's Association (SEWA) or a vehicle to save is not that they are incapable of saving, but that they don't have control over that money if it is left in the household. It gets siphoned off for drinking or gambling by the husband.(1) Once a woman starts gaining confidence that she is not going to let that happen, then tensions can ensue. It is like any power struggle. It happens gradually. In the process of there being a tension, the income of that household is rising. What do you do? Do you prevent this from happening? An adjustment process must occur. Some people are critical that this kind of engagement affects the local culture. My belief is that this is not like Hinduism. There is a moral issue about a woman having choices. And her feeling that she has choices is a moral good. Journal: Would you say that the economic advances that some of these women have experienced has also translated into an ability to participate in the political process? Barry: Absolutely. If this was just about one woman gaining income, it would not be nearly as powerful. That is what makes Women's World Banking a complex story to tell. Just saying how many loans did you bang out, that would be a very easy story to tell. But it really isn't like that. It is really about economic transformation. It is about the clients and members of these organizations growing and having more influence over their households and communities and nations. The single best way to do that is in a way that is not patronizing. You know this concept of "empowerment?" What does that mean? Women's World Banking is famous for inventing buzzwords: words like "transformation," "lateral learning," etcetera. But we did not invent the buzzword "empowerment" and I am thankful for that. I hate it. The reason I hate it is because it is basically a very patronizing term and is often used in a very patronizing way. Empowerment means to me, "I have power and I am bestowing it on you." That is very different from saying "I see you. I see myself in you. I see a low income woman who is actually much better than me in putting the pieces of her life together; as an innovator, entrepreneur or someone with tremendous imagination and courage What that woman needs is not me giving her courses on empowerment. She needs to be recognized. She needs vehicles. Organizing is important so that she is not alone. The other thing that I think is very powerful is that if you only organize, if you only do the political thing, you are going to run out of steam. If you are moving on the policy impact and at the same time building and providing services that will last, you are giving people the tools and you are also providing a sustainable vehicle for both sides to move forward. Journal: What are the effects of loans on the social dynamics among women in South Asia? Barry: Normally, what happens is that women start lending their own money among themselves. That gets very serious, because you have got to judge whether your neighbor is going to repay the loan for buying a cow or for re-claiming her land from the landlord. …

Legal Aspects of the French Privatization Program: Review of the Pechiney Privatization as a Practical Case

Abstract: Description of the Privatization Program Under a law dated 19 July 1993, providing for the second privatization program, the French government generated a list of 22 public sector companies to be privatized, including Banque Nationale de Paris (BNP), Bull, Companie Nationale Air France, Credit Lyonnais, Rhone Poulenc, Elf-Aquitaine, Assurances Generales de France (AGF), SEITA, Thomson SA, Renault, Union des Assurances de Paris (UAP) and Pechiney Most of these companies became part of the public sector as a result of the nationalization measures implemented after the Second World War In addition, in 1982 the Socialist government decided to increase the number of state-owned firms and nationalized five of the most important industrial groups (Compagnie Generale d'Electricite, Saint-Gobain, Rhone-Poulenc, Pechiney and Thomson SA) as well as the 39 largest French banks These nationalizations cost the state over 60 billion French francs (FF) (approximately US$9 billion)(*) Between 1993 and the first half of 1995, BNP, Elf-Aquitaine, Bull, Rhone-Poulenc, SEITA, UAP and Usinor-Sacilor were all privatized In connection with the economic policy of reducing public expenditures, the French government decided to accelerate the privatization program in July 1995, since it expected revenues from the program in an amount equal to approximately FF40 billion for that year In this respect, a decision was made pursuant to a decree dated 17 July 1995, to proceed with the transfer to the private sector of the French state's shareholdings in Pechiney, Compagnie Generale Maritime and Renault Background on Pechiney Anticipating its privatization, the Pechiney group decided at the beginning of 1995 to restructure its activities The group's core businesses were the production and sale of primary aluminum and aluminum products (25 percent of its turnover for 1994) and the production of packaging materials The total amount of Pechiney's turnover equaled FF70 billion for 1994 At that time, Pechiney was also the third-largest worldwide aluminum producer and the second largest in Europe As part of its strategy of focusing on core aluminum and packaging activities, the Pechiney group launched a major divestiture program aimed at disposing of certain non-strategic businesses and improving the financial structure of the group through debt reduction Through this divestiture program in 1995, the group sold assets valued at approximately FF10 billion Assets sold included shareholdings in the components and system division (Carbone Lorraine), the group's North American glass activities (Foster Forbes), the group's North American food metal and specialty activities and the group's turbine components division (Howmet) Given the extent of its divestiture program, the consequent debt reduction and the increase in operating results for the first half of 1995 (as a result of the high market price for aluminum at that time), Pechiney appeared by October 1995 to be in a good position to be effectively privatized When the privatization process was launched in November 1995, the French state held 558 percent of the share capital and 804 percent of the voting rights of Pechiney AGF, a public sector company at the time of the Pechiney privatization, which itself was recently privatized in May 1996, and BNP, a company privatized in 1993, owned respectively 88 percent and 76 percent of the share capital and voting rights In addition, 32 percent of the share capital and voting rights of Pechiney were owned by financial institutions including the Caisse des Depots et Consignations The remaining percentage of the share capital (246 percent) was held by the public in the form of non-voting securities with dividend priority rights called certificate d'investissement privilegies (CIPs); the corresponding voting rights evidenced by certificates had been granted to the French state at the time of the issuance of the CIPs …

Economic Liberalization and Separatist Nationalism: The Cases of Sri Lanka and Tibet

Abstract: Overview At the poles of South Asia, the Sri Lankan state and the Chinese state in occupied Tibet are enmeshed in separatist movements.(1) The character and setting of those movements, however, are significantly different. Hindu Tamils violently fight for Tamil edam (independence) from Sinhalese Buddhist dominance and oppression in the island country; Buddhist Tibetans nonviolently (primarily) protest Chinese occupation of the landlocked, Himalayan-bound country with a goal of regained Po (Tibet) rangzen (independence). Sri Lanka, a former imperial British colony; and Tibet, now colonized by China, exhibit the broad contextual variance in which separatist nationalism arises. Such nationalism, perhaps, has as many causes as there are cases. The cases studied here, however, exhibit some important common causal features. In particular, the Tibetans and Sri Lankan Tamils have been on the receiving end of economic development policies that exacerbate their impoverished situations and ignore their demands. In a comparative look at the violent conflicts in Sri Lanka and Yugoslavia, Sumantra Bose argues that in contravention to the notion that ethnic differences have led to civil war, responsibility lies generally in state policies that magnify and exacerbate those ethnic differences. Responsibility, therefore, lies in the hands of political elites.(2) Supporting this thesis, this article looks at the extent to which economic development policies of the state--particularly the policy of economic liberalization--are determinants of separatist nationalism. In both Sri Lanka and Tibet, the state has promoted economic development schemes that aim to achieve a unified nation-state that presupposes the acquiescence of minority populations. By comparing Sri Lanka and Tibet, this article also intends to draw lessons from the former case that may be applicable to the latter. In particular, it attempts to lay out a rationale for why China may wish to reconsider its economic policies and devise a political solution for the Tibetan situation. This article does not propose that economic development policies are the sole or even the main state policies that have fueled ethnic divides. Indeed, numerous scholars of Sri Lanka have pointed to a series of Sinhala-biased education, government employment, language and religious policies as multiple sources of the ethnic unrest. As for Tibet, its pre-1951 status of de facto independence offers a straight forward reason for the existence of Tibetan separatist nationalism. Bluntly, Tibetans want their country back. Yet an understanding of separatism and broader state-society relations would be incomplete without a critical look at economic policies. Development policies have had daily positive and negative impacts on the lives of all members of society, and such impacts have shaped the Tamil and Tibetan societies' views of the state. In Sri Lanka, civil war has erupted and persisted. In Tibet, signs of a return to violent resistance are appearing.(3) A broader understanding of the state's economic development policy is also critical because in Tibet the state has recently proposed accelerated economic liberalization policies as the solution to separatist nationalism. This plan may be seriously misleading, since in reality liberalization may tend to propel separatism into a more violent movement. Ethnic Differences in Sri Lanka and Tibet Despite significant reason for placing blame for nationalism's rise on policies of the state, ethnic difference nonetheless remains a common basis for separatism. In Sri Lanka, the differences and tensions between the majority Sinhalese and minority Tamil (particularly "Ceylon/Sri Lankan Tamil") communities certainly predate the British takeover of the island in the early 19th century. Scholar Dagmar Hellmann argues that "there is, however, little doubt that the immediate roots of the problem lie primarily in the nineteenth century. …

Privatization and the Consolidation of Democratic Regimes: An Analysis and an Alternative

Abstract: What is the relationship between privatization and democratization in the post-communist countries? Will privatization hinder or promote the consolidation of these infant democracies? In order to answer these questions, I will first develop a typology of privatization strategies and then explore their effects on the transition to democracy and the consolidation of democracy. My thesis is two-fold: first, privatization has eased the transition to democracy, in the sense that power is shifting from the old political elite into a new economic elite; second, privatization, as practiced so far in Russia and Eastern Europe, makes the consolidation of democratic regimes difficult. To solve this dilemma between transition and consolidation, we need an alternative strategy of economic transformation in the post-communist countries. A sketch of this alternative concludes this paper. Though my focus is on Russia and Eastern Europe, the conclusion of this paper will hopefully have broader implications for countries in Latin America and other parts of the world where political economies are experiencing the same kind of fundamental transformation. A Typology of Privatization Strategies Privatization has been topping the agenda of economic transformation in Eastern Europe and Russia for several years. Soon after they came to power, almost all post-communist governments in the region announced major programs for privatizing their state-owned enterprises. These privatization strategies can be classified along two dimensions: whether a given strategy advocates a rapid or slow privatization process, and whether a given strategy advocates privatization from below (spontaneous privatization) or from above (centrally directed privatization). This is illustrated in the following figure. Although arbitrary, this typology enables us to focus on two crucial dimensions of the privatization debate and its relationship to the consolidation of democracy. The first dimension is the timing and pace of privatization, indicated in Figure 1 as "slow" versus "rapid." Democratic institutions vary in levels of efficiency; for example, resolutions are reached more quickly if all that is required is a presidential decree rather than a debate in parliament. A more rapid privatization strategy would require a more efficient state decision-making apparatus, and this could have important implications for the transition to a democratic regime. When the objective is to privatize as rapidly as possible, it can be argued that presidential decree power is needed to circumvent the obstacle of prolonged parliamentary discussion. The second dimension has to do with the types of privatization programs, indicated in Figure 1 as "spontaneous" versus "centrally directed." The concept of "spontaneous order" was introduced by Friedrich Hayek, one of the most influential Western economic thinkers in Eastern Europe, who considered a free-market economy without government intervention to be the most efficient. His theory has been invoked to counter any attempts to guide the privatization process through policy intervention from above, except in the form of general laws enabling the private sector to grow spontaneously and eventually outgrow the state sector. In contrast, a centrally directed strategy of privatization usually requires the government's privatization agency to sell state assets on a case-by-case basis or distribute free vouchers to the population. Figure 1: Typology of Privatization Strategies Slow Rapid Spontaneous Private Sector Growing Nomenklatura/ Out of State Sector Worker Buyout Centrally Directed Case-by-Case Sales Free Vouchers Actual privatizations are almost always a mixture of these pure strategy types. For example, between 1992 and 1994 the Russian privatization program was a combination of insider buyout and free voucher distribution. …

Lessons from Argentina's Privatization Experience

Abstract: Introduction Privatization is conceived as a drastic change in the role of government. Advocates of privatization maintain that the state administration should desist from production and pricing decisions, and instead focus on the design and implementation of a regulatory process. The government should direct its scarce human capital toward social spending in areas such as education, health, poverty abatement and the creation of a social safety net. Additionally, the government should work, in concert with the private sector, to develop economic infrastructure. This change in the role of government was typically be pursued at the same time that the total level of government expenditure and taxation would decrease. In short, the idea was to reduce market distortions created by the government while reorienting its activities to areas where a case for its involvement based on economic or distributional grounds could be made more sound. During the period from 1990 to 1996, the Argentine state underwent a broad structural reform, revising regulatory systems and privatizing most public companies, including airlines, telecommunications, utilities, railroads, ports, petrochemical plants, the state oil company and some provincial banks. Some may argue that Argentina's experience with state-run companies was extreme. Nevertheless, it is still a valuable example of the advantages and shortfalls of privatization. For this reason, we will use it extensively to illustrate why privatization is advantageous. To demonstrate this, we will discuss four main issues: efficiency, capital accumulation, public deficits and corruption. In the following section, we provide a framework for designing privatization programs. The primary objective in the initial step of any privatization exercise is the development of a well-conceived regulatory framework that ensures competitive results. We devote attention to the costs of regulation and the dangers of political impediments and institutional weaknesses. Finally, we conclude that privatization raises social welfare. Reasons for Privatization Although there are several justifications for state involvement in the provision of goods and services, there are many instances in which privatization increases economic welfare. One compelling reason for privatization is that it frees budgetary resources. During the 1980s, the losses of Argentine state-owned enterprises and their investments (financed by transfers from the treasury, public debt or tax receipts) amounted to approximately $10 billion per year, which, at that time, was more than 7 percent of gross domestic product (GDP). Privatization can reduce the deficit previously generated by state-owned enterprises, diminishing public debt and the burden of interest payments. The resources that have been freed can then be used to finance effective social programs. Not only do the resources previously used to finance the continuous deficits of the state's enterprises become available, but the process of privatization itself gives the country the opportunity to attract foreign direct and indirect investment, as well as domestic private investment that can raise capital productivity. Without large investments in infrastructure (roads, railroads, ports and communications), economic growth will be hindered. While the state typically cannot afford such expenditures, private sector and foreign investors can. The privatization of public enterprises makes such investment opportunities possible. Privatization also eliminates inefficiencies. The frequent inefficiencies of state-run companies has been demonstrated by the necessity of subsidizing companies to ensure their survival in a competitive market, the historically low productivity of public investment, the distorted prices of goods and services, the existence of excess capacity and the insufficient and/or low-quality provision of goods and services. …

Refugee Protection in South Asia

Abstract: Historically South Asia has witnessed substantial intra-regional movement and dislocation of regional groups fleeing ethnic or religious persecution and political instability. India's multiethnic, multilingual and relatively stable society has often made it an attractive destination for these groups. This phenomenon continues today. Tamil refugees from Sri Lanka, Jumma peoples from Bangladesh and Chin and other tribal refugees from Burma, Afghanistan, Iran and even Sudan today comprise the bulk of India's refugee population. The Indian government has been inconsistent in dealing with refugees, changing its official policy on the number and origin of refugees to be allowed. Despite the fact that India has a large refugee population, international scrutiny is seldom given to the conditions in which these refugees live. Often, these conditions are extremely harsh, falling short of international standards and forcing refugee communities to struggle to fill even their most basic human needs. The Indian government compounds the problem by failing to provide access to local and international non-governmental organizations (NGOs) that wish to address refugee needs. The United Nations High Commissioner for Refugees (UNHCR) has been particularly disappointing in this regard, tending to underinterpret its mandate for refugee protection in South Asia. Little if any information is available to the international community or to the Indian people about the plight of these refugees once they reach India. This article will describe the condition of South Asian refugees in India and draw the Indian government's attention to the need for legislation to protect refugees and asylum seekers. Moreover, this article will examine the role of international organizations such as the UNHCR and domestic NGOs such as the South Asia Human Rights Documentation Centre (SAHRDC) in New Delhi. Who is a Refugee? According to UNHCR mandate and the 1951 Convention Relating to the Status of Refugees, the term refugee applies to those people who: (a) have fled their countries because of a well-founded fear of persecution for reasons of their race, religion, nationality, political opinion or membership in a particular social group; and (b) cannot or do not want to return due to fear. The 1967 Protocol to the Convention altered this definition only insofar as it removed the time limit of the former, which only covered refugees who had been displaced as a result of events occurring before 1951. Applicable Laws The refugee problem was acknowledged as having international dimensions and requiring global cooperation from 1921 to 1922 in the aftermath of the First World War, the breakup of the Austro-Hungarian empire and the Russian revolution. However, real movement to protect refugees began only with the 1948 Universal Declaration of Human Rights, which proclaimed basic rights for all human beings irrespective of their nationality or citizenship. This declaration was an important first step for refugees, who are particularly vulnerable in foreign countries. It is therefore incumbent upon the international community to protect their rights both in countries of origin and asylum. A myriad of specialized and regional human rights instruments have sprung from the foundation of the International Bill of Human Rights. The inalienable rights enshrined in the covenants such as Article 6 of the International Covenant on Civil and Political Rights (ICCPR), are also applicable to the refugees. India has undertaken an obligation by ratifying the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights to accord treatment to all non-citizens that is equal to that of its citizens. India is presently a member of the Executive Committee of the UNHCR, which entails the responsibility to abide by international standards on the treatment of refugees. …

Uncertain Success: The Political Economy of Indian Economic Reform

Abstract: Introduction Over the last decade and a half, and especially since 1991, India has been implementing economic reforms to liberalize and globalize the economy by reducing state ownership and control and by opening up to greater trade, foreign capital flows and technology imports. This implies a dramatic change in course for an economy that has firmly followed the model of dirigiste, import-substituting industrialization since independence and the inception of planning in the early 1950s. The Indian government and neo-liberal economists take for granted that these reforms will free the economy from its state-imposed shackles and move it significantly beyond its earlier sluggish "Hindu" rate of growth.(2) Indeed, proponents of reform argue that India's somewhat improved economic performance in recent years is the result of the reforms implemented in the 1980s and early 1990s. According to this view, the main source of uncertainty lies in whether the Indian state can remain effective and can sustain the pace of reform in the face of political constraints, especially given the fact that the Congress party, the main proponent of reform, was voted out of power in May 1996 and replaced by a minority coalition government. The purpose of this article is to assess the likely effects of the reform measures from a political economy perspective. The term political economy is used in the sense of economic analysis that goes beyond the standard neoclassical approach, on which most of the analysis of economic reform is based, to incorporate political factors and explore the interaction between economic and political forces. The standard neoclassical approach suggests that the recent reforms can be expected to increase Indian economic growth. However, this article will find more room for doubt by introducing economic considerations that are typically ignored in the standard approach, such as the role of aggregate demand, structural constraints and income distribution. Moreover, a close examination of the interaction of political and economic forces tells a different and less optimistic story. After examining the effectiveness of the Indian state in the economic sphere, this analysis will address the pre-reform period, outlining pre-reform policies, assessing their economic implications and discussing the economic and political considerations that led the government to change its economic strategy. This article will then look at the reform and post-reform periods, describe the reform policies and assess their impact. The article will conclude with a discussion of the future of reform, focusing on reform from a political economy perspective and assessing the likelihood of long-term success. India's Political Economy Because the Indian state suffers from a lack of autonomy in relation to society; it faces certain constraints in making policy changes. These constraints can be traced to the strengths and weaknesses of the dominant classes in India, the interests of these classes and the relationship of each class to the others and to the state.(3) To allow for an analysis of the autonomy of the Indian state, this article will assume that the state is a distinct actor in Indian society with its own interests. The question of what constitutes the state's interests is obviously complex, and would have to encompass a broad spectrum: private incomes of individuals within the state; votes and money to conduct elections in order to remain in power; class interests of those comprising the state; and developmental concerns and the ideology of bureaucrats and politicians. A useful point of departure in this analysis is to start by examining the extent to which the state is able to implement its development goals.(4) Peter Evans, a political sociologist who has written extensively on questions of autonomy and state effectiveness, has argued that the state's ability depends on "embedded autonomy," where autonomy refers to the capacity to operate without being constrained by society, and embeddedness allows it to respond to changes in economic reality in a sophisticated manner. …

Privatization, the State and International Institutions

Abstract: Introduction Recent changes in the global economy have not come about in the manner envisaged a generation ago. Production and distribution are being organized in accordance with decentralized, private-sector patterns coordinated by the market, rather than in a centralized manner by interventionist governments. Though this would indicate a reduced role for governments, the privatization process demonstrates that governments are still significant actors. In a narrow sense, privatization implies merely a shift in economic activity from the public to the private sector with changes in the composition of ownership. More broadly, however, it creates new processes and priorities for governments. Through their policymaking and regulatory roles, governments can enhance the private sector's ability to respond to the demands of a globally integrated economy. Moreover, with growing economic interaction between nations, there is an increasing need for international intermediaries. International organizations and institutions, such as the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD), long seen as relevant to only one of the blocs of the divided world, are becoming the backbone of a single, universally accepted world economic system in which partnerships replace confrontation. In this brief essay, I examine how the trend toward global economic liberalization has raised new questions about the changing responsibilities of governments, and the expanding role and new directions of international organizations. The privatization process illustrates that, despite a reduced presence in the marketplace, governments have much to contribute toward efficient economic management. In addition, international organizations can further enhance governments' abilities to encourage growth through the establishment of global coordination and norms for state behavior. The Role of Governments There is no question that governments have the potential to strengthen an economy's capacity to respond to a more market-oriented, integrated world. To meet international demand, governments can stimulate, facilitate and support the development of competitive enterprises, as well as enhance the linkages between investment, production, trade and technology. They are able to do so in three ways: as a confidence builder, a catalytic agent and a mediating agent. As a confidence builder, governments can encourage households to save or consume, entrepreneurs to set up businesses and investors to move forward in productive activities. Governments also have the ability to create the necessary macroeconomic and market conditions to mobilize savings that can be transformed into long-term lending for enterprise development. Governments may reduce commercial, financial and investment risks associated with sharp tax increases, interest rate adjustments or currency movements that undermine confidence in a national currency as a store of value. Additionally, governments are able to stimulate the development of necessary physical infrastructure and human resources, as well as to establish a favorable legal and commercial framework for developing efficient financial markets, technological capabilities and competitive enterprises. As a catalytic agent, governments are able to stimulate entrepreneurship and enterprise development among private-sector firms. Governments must provide appropriate incentives for business start-ups and the retention of earnings for technological research and development. Policy-based, specialized lending programs encourage the development of small and medium enterprises (SMEs) and the cultivation of their linkages with larger or export-oriented enterprises. One of government's most important catalytic tools is its sponsorship of regulatory reforms. Economic and legal reforms can generate enterprise competition in both input and output markets by leveling the playing field to encourage business start-ups, thereby stimulating wealth creation. …

Future Uncertain: Indian Security Policy Approaches the Millenium

Abstract: Introduction As the end of the millennium approaches, Indian defense policy is in disarray A number of factors have led to a lack of clear goals and objectives. During much of the Cold War, Indian defense planners were preoccupied with the three major threats of a possible Chinese incursion, Pakistani attempts to seize or foment discontent in the state of Jammu, and Kashmir and other various threats to internal stability and security. The end of the Cold War has not fundamentally altered India's principal security concerns. However, many of the components of the strategy that it had devised to cope with these threats are no longer in place. India's domestic resources and efforts were sufficient to cope with the Pakistani threat and internal security threats. The Chinese threat, however, required support from allies. In its efforts to cope with this threat, the Indian political leadership carefully forged a relationship with the Soviet Union in the 1960s and the 1970s. The Soviets, keen on limiting both Chinese and American influence in South Asia, supported India's position on the Kashmir issue, supplied India with a range of sophisticated weaponry at highly favorable rates and opened markets to a plethora of Indian consumer goods.(1) The end of the Cold War abruptly loosened many of these familiar moorings of Indian defense policy. Russia saw little need to perpetuate the strategic nexus that had linked India and the former Soviet Union. Accordingly, it was no longer willing to provide India with weaponry at highly concessional rates. Nor was it ready to unequivocally support its position on the Kashmir question. Having failed to anticipate the sudden collapse of the Soviet bloc, India's political-military leadership suddenly found itself in uncharted territory as the long-familiar anchors had suddenly disappeared from the international arena. As early as 1989, Indian policymakers started to improve relations with China. New Delhi had to make disproportionate concessions to obtain Chinese cooperation.(2) Indian diplomacy, although unable to neutralize the Chinese threat, nevertheless succeeded in reducing it to more manageable proportions as the two sides agreed on mutual troop withdrawals and a series of other confidence and security-building measures.(3) Even though India's policymakers had demonstrated dexterity in reducing tensions with China, they did not display similar skill in improving relations with India's long-standing adversary, Pakistan. Nor did they show much ingenuity in coping with a variety of internal conflicts. On the contrary, the policies adopted in the domestic realm promoted and exacerbated incipient conflicts. Consequently, three threats remained at the end of the Cold War: the Pakistani irredentist claim to Kashmir, the Chinese capability threat and internal conflicts. The Challenges Ahead As India approaches the end of the century, what then are the principal threats to its security and how is it gearing up to cope with them? This essay will seek to address these questions. Pakistan's Territorial Claims Pakistan remains India's principal adversary. Although a variety of other issues divide the two states, the principal source of discord stems from the disputed status of the state of Jammu and Kashmir. Pakistan's claim to Kashmir is irredentist. Its leaders have long argued that Pakistan remains "incomplete" without Kashmir because of its predominantly Muslim composition and its territorial contiguity.(4) India has held half of Kashmir with a tenacity equal only to Pakistan's hold of the other half of the region. Initially, India sought to demonstrate Kashmir's secular status, but later it claimed the imperatives of retaining all of Kashmir for the purposes of state-building and national cohesion. Unbridled escalation of the conflict within Kashmir could conceivably draw India into another war with Pakistan. …

Poland's Privatization Process: A View from the Inside

Abstract: Interviewed on 14 July 1996 by Mark J. Bonamo for the Journal International Affairs Journal: Why did Poland, when shifting from a command to a market economy, go through the method known as "shock therapy?" Why did it choose a sudden transformation rather than a gradual one? Lewandowski: Well, this was the most likely escape from the communist design. This was done under the pressure of hyper-inflation. There was disorganization and disorder in the economy, so one reason for "shock therapy" was to immediately restore the basic macroeconomic order in this disorganized economy. And the second reason is that some of us were conscious of working in this honeymoon period of reform. After the change, after regaining sovereignty, there was limited time to do as much as possible before the political games began disrupting the reforms. So the first reason was to escape from hyper-inflation and a really disorganized economy, and the second was to do as much as feasible from this macroeconomic switch to liberalize prices before the start of a normal political game. Journal: What were the first industries to be privatized? Lewandowski: The beginning course followed the British public offerings model of, for example, British Telecom. This meant to simultaneously sell five companies in public offerings. The selection of these initial companies was...done to fit to what was seen as attractive for a public offering and for the beginning of a Polish stock exchange. But certainly the easiest part of privatization was to privatize the consumer industries, like the systematic privatization of the cosmetics industry and confectioners. Generally, at the beginning, it was [on] a case by case basis, not a conscious selection of branches to be privatized. This was an investor-friendly privatization. Journal: In these initially investor-driven privatizations, do you think the industries and their efficiency were improved dramatically immediately, or did it happen over time? Lewandowski: It depends on the method of privatization. My research center has done research on post-privatization results and it is really striking that [companies] sold to foreign investors, after being privatized, consumed 10 times more investment than in the case of [sales to] domestic Polish buyers. This reflected the different financial capabilities of foreign investors and domestic investors like Polish businessmen. Therefore, foreign trade sales were most efficient in immediately restructuring industries, immediately bringing some inputs of technology and capital. This was seen, for example, at the very beginning with Philips investing in Polam Pila, which was one of the prototypes of trade sales, or when Thomson invested in Polkolor Electronics. The typical Polish inside-oriented privatization--such as managers and employees buying their company on a gradual basis--delayed restructuring...of both the particular company and our economy. Journal: How do you think the people were affected by these changes in the industry? Do you think that the people served by these industries saw an immediate improvement in their living conditions, or do you think they are still waiting for that improvement? Lewandowski: The immediate and tangible financial effect was the privilege in share-holding. They [employees] are normally privileged [to buy] up to 20 percent of shares for half price. Employees were promptly selling privileged shares to strategic investors, then receiving some case. This was the immediate tangible gain in money. Normally what was negotiated with investors was either guarantees of employment or a gradual reduction of employment, and, at the same time, some increases in wages whenever it was feasible and not disruptive for companies. Social guarantees constituted part of the privatization conflict. There was one painful well publicized post-privatization conflict, the case of Porcelana Waltrych. There are no exact evaluations of improvements in standards of living, but for example, the [proceeds from] cashing in a share were enough to buy a small car. …

Statehood in South Asia

Abstract: In the vast region now known as South Asia at the beginning of 1997, most of the major states--including India, Pakistan, Bangladesh and Sri Lanka--have some form of democratic government for the first time since the formal British withdrawal in 1947. All of these nations are engaged in measures of economic liberalization, moving away from government control of resources toward a market economy. All are also seeking, however tentatively, to increase and strengthen interregional relationships.(1) Although democracy, economics and foreign policy have been important, the overarching concern in all the states and the one that shapes all the other issues is the quest for national unity. The process of decolonization that led to the formation of the separate states of South Asia meant that the externally imposed unity of the colonial state had to be replaced by policies that required the assent of the governed. It is this theme of the search for national unity that will be analyzed in this article through brief examinations of three of the states, with a fourth, Bangladesh, being noted in relation to India and Pakistan. More attention will be given to India, since the same factors that give India a special prominence within the region make it an excellent starting place for considering the South Asia region in general. The first factor that explains India's prominence in the region is its overwhelming dominance in population, industrial development and military power. Equally important is the geographical factor. Since the state of India comprises almost three-quarters of the subcontinent, which is bound by mountains and seas, it is an "intelligible isolate." A third factor is that the civilizations and cultures of India have made an impression on all the states of the region, despite the other states' own strong indigenous cultural and religious characteristics, such as Islam and Buddhism. A fourth factor giving India a special importance is that all the states in the region, especially the four largest ones, have experienced political trends rooted in what is now the state of India. Beginning with the Mauryan Empire in the fourth century B.C. and continuing into the modern era, political forces have emanated from India throughout the region. India had a special importance for the British empire and had a legal and political status different from any of the other colonies. It was regarded as the dominating power in the region. Lord Curzon, as governor general, expressed a grandiose but widely held vision of India's hegemony in 1909 when he wrote: On the west, India must exercise a predominant influence over the destinies of Persia and Afghanistan; on the north, it can veto any rival in Tibet; on the north-east it can exert great pressure upon China, and it is one of the guardians of the autonomous existence of Siam.(2) This was a dangerous legacy for the Government of India to leave to its successor state, the Republic of India, as the world discovered when India and China quarreled over the borders that had been left by the British. Upon British departure in 1947, India's influence in the area continued when it began to interact with the new border states of Pakistan, Nepal, Bangladesh, Sri Lanka, Bhutan and Sikhim. The word "empire" is defined by the Oxford English Dictionary as "the aggregate of many states under one common head." The British viewed their empire in these terms. Britain had conquered and brought under one rule what was a hackneyed congeries of states and kingdoms in the geographical area that Europeans had called "India" since ancient times. That the official and legal documents usually referred to the "Government of India" and not "India" reflects that the British perceived India as a government, but not a state and certainly not a nation. Looking back over 50 years of independent statehood in South Asia, one can identify dominant issues and concerns in each of the states. …

Alleviating Motion Sickness: Transportation Privatization Trends in Developing Countries

Abstract: Privatization has a far greater impact on the lives and economies of developing country citizens than those in the G7.(1) It is a major restructuring tool for these emerging markets, and privatization of the transportation sector--including land, sea and air infrastructure and services--is vital: nascent economies cannot grow and prosper if they lack the ability to efficiently transport goods and people, both internally and externally. As the state divests itself of its control over industry, the products of privatized businesses, while more competitive than their antecedents and likely of better quality, must reach their markets, both at home and abroad, quickly and efficiently in order to maintain their newfound competitiveness. The importance of transportation privatization in the developing world should not be underestimated. Recent estimates by the World Bank report that these emerging market economies are anticipating growth of approximately 6 percent per annum versus 2.5 percent in the G7 over the next decade. Rapidly developing economies need efficient means of moving workers from homes to factories and offices. Poorly maintained roads, ports, and rail systems undermine the competitiveness of manufacturing and distributing products. Moreover, renovating dilapidated or sub-standard airports (or building news ones) encourages business people from high-income economies, in their never-ending search for new markets and strategic investments, to travel to developing countries. Without a reliable and cost-effective transportation system, long-term business plans are impossible to implement. Furthermore, the modes of transportation encouraged by the developing country during its growth spurt will ultimately shape its socio-economic destiny. Economies are largely the product of the dwelling, spending, and saving habits of their consumers which are, in turn, significantly influenced by available forms of transportation. Highly developed public rail systems, for example, might foster greater urbanization, while national highway projects encourage the use of automobiles and suburbanization. By extension, the preferred form of transportation will dictate the demand for the raw materials associated with it: reliance on railways may ultimately reduce the demand for steel, rubber and petroleum, while increasing the demand for other forms of manufactured goods, energy, and services associated with the construction and running of rail systems. The privatization of transportation infrastructure in the developing world, therefore, will not only impact product distribution logistics, but also demographic trends, leisure time availability, consumption patterns and sectoral growth. The future economic identities of these markets will be shaped by today's privatization decisions.(2) The ongoing surge in transport and infrastructure privatization in developing countries also serves to remedy the increasing frustration on the part of the citizenry with the poor provision of infrastructure and transportation services by public and state-owned monopolies; to relieve widespread budget deficits and adapt to fiscal constraints which limit the amount of public funds that can be earmarked toward infrastructure development and maintenance and to apply new technology that has undermined previous rationales for monopoly ownership of transportation services and infrastructure. While transportation privatization consistently yields similar benefits, by reviewing select experiences in various regions it is clear that countries are choosing the privatization path for different reasons and under different constraints, both political and financial. To a large extent, a country's geography and demographic patterns will dictate its transportation requirements, and its history of state ownership and incorporation in the global economy will affect the kind of financing to which it has access. In many cases, the need for large-scale privatization financing has led to the development of local capital markets, banking sectors and new and innovative financing techniques, highlighting the synergistic link between capital market development and economic growth in emerging markets. …

Czech Privatization: The Case of Filmove Studio Barrandov

Abstract: Introduction In 1991, when the former Czechoslovakia was carpetbagger heaven, I went to Prague as a privatization advisor under the auspices of the U.S. Agency for International Development.(1) My primary activity during an 18-month period was to lead a team advising the management of Filmove Studio Barrandov, the country's largest film studio, on the studio's privatization, which Barrandov's management hoped to accomplish through the sale of the studio to a group of investors known as Cinepont. Much of my work as an advisor centered around the issue of valuation, since it was in the interest of the Czechoslovak government to sell the studio at a fair price. Although the privatization of Barrandov presented a wide range of issues particular to the rarified backdrop of the European film industry, I believe that most of the problems encountered were common to privatizations across a broad range of industries in Eastern Europe at the time. The issues raised during Barrandov's privatization fall into three broad, and occasionally, overlapping categories: (1) the information required to value the enterprise subject to privatization; (2) the impact of governmental and legislative initiatives on the value of the enterprise; and (3) the objectives and management of the privatization process. The first category addresses gaps in vital information and the lack of predictability regarding the enterprise. These problems were all too common in centrally planned economies that were thrown into disequilibrium by sweeping changes in policy. The second category addresses the changing legal and regulatory environment in which wide-scale privatization occurs. The third focuses on the tensions that may arise between the privatization advisor, the government that owns the enterprise to be privatized, the existing management of the enterprise and, on occasion, competing advisors. After a brief discussion of Barrandov and its history, this article will discuss some of the issues in each of these categories as they arose during the film studio's privatization. The article concludes with a brief survey of events at Barrandov since its sale to Cinepont in 1992. History of the Filmove Studio Barrandov In 1991, Barrandov was the largest film studio in Czechoslovakia and provided a full range of production services to the Czechoslovak and international motion picture industries, as well as the television programming industries. Among the production services provided by Barrandov were the rental of sound stages and camera equipment and the provision of props, costumes, and sets. The studio also produced feature length films for domestic and international theatrical release, and owned a film library of approximately 350 titles. Through a sister company, Film Laboratories, Barrandov provided its clients with motion picture film processing services. Barrandov's activities can be placed in an appropriate context through a brief primer on the film industry. The business of films involves three broad functional categories of activity: production, distribution, and exhibition. Production involves the actual making of the film; it encompasses the development of a script, the close of principal photography (the actual shooting), and the editing of a final cut. Film production is a risky business in which even successful producers often have a volatile record of hits and misses. Distribution involves contracting with exhibitors to show the film, producing and delivering prints, and advertising the film. Most U.S. film studios are involved in both production and distribution, although over the years they have found ways to reduce many of their traditional production costs. Major film studios typically have large film libraries that produce enough cash flow through rentals and royalties to cover studio overhead. Exhibition involves the operation of movie theaters, where the film is screened before a paying audience. …

Women, Population and Sustainable Development in South Asia

Abstract: Introduction According to the recently released 1996 revision of the official United Nations population estimates and projections, at mid-1996, world population stood at 5.77 billion persons.(1) Between 1990 and 1995, the world population grew at 1.48 percent per annum, with an average of 81 million persons added each year. This is considerably slower than the 1.72 percent per annum growth rate of the 1975 to 1990 period. Additionally, the annual increment is notably less than the 87 million persons added each year between 1985 and 1990.(2) In South Asia--Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka--the population exceeded 1.2 billion people in 1996, which is more than one-fifth of humankind. Table 1 presents selected population and socio-economic indicators for countries in South Asia. The sharp decline in South Asia's death rates in the post-Second World War era has been accompanied by a much slower reduction in birth rates. As a consequence, the region's population has grown rapidly, adding significantly to its large population base. This rate of growth continues to challenge and constrain the ability of governments to improve the quality of life, with the result that South Asia has the bulk of the world's poor in its midst as well as the highest concentration of need for reproductive health (RH) and family planning (FP) information and services. Therefore, the provision of comprehensive reproductive health services, the empowerment of women, improved education for girls and a commitment to gender equality and equity will be critical to achieving sustainable development. Table 1: Selected population and Socio-economic indicators for countries in South Asia Country Population Crude Birth Infant Mortality (thousands) Rate Rate (per 1000 1995 Estimates (Per 1000 live births) population) 1990-95 Estimates 1990-95 Estimates Afghanistan 19,661 49.7 163 Bangladesh 118,229 26.7 91 Bhutan 1,770 41.6 117 India 929,005 27.5 78 Maldives 254 41.6 60 Nepal 21,456 39.6 96 Pakistan 136,257 39.4 85 Sri Lanka 17,928 18.6 18 Country Total Illiteracy Rate (percent)(*) GNP Per Capita ($U.S.)(*) Total Male Female Afghanistan 68.5 52.8 85.0 Not available Bangladesh 61.9 50.6 73.9 220 Bhutan 57.8 43.8 71.9 180 India 48.0 34.5 62.3 310 Maldives 6.8 6.7 7.0 500 Nepal 72.5 59.1 86.0 170 Pakistan 62.2 50.0 75.6 410 Sri Lanka 9.8 6.6 12.8 540 Source: United Nations, World Population Prospects: The 1996 Revision (New York: United Nations, 1996). (*) Adult Illiteracy Rate (UNESCO) and GNP Per Capita (World Bank database) - in UNESCO, World Education Report 1995. (A person defined as illiterate is unable both t8 read and write a short simple statement on everyday life with understanding.) It is clear that on the eve of the 21st century the countries of South Asia face several challenges in the area of population and sustainable development. According to the Programme of Action, which emerged from the 1994 International Conference on Population and Development (ICPD), sustainable development is defined as, inter alia, long-term sustainability in production and consumption relating to all economic activities including industry, energy, agriculture, forestry, fisheries, transport, tourism and infrastructure in order to optimize ecologically sound resource use and minimize waste. …

The CTBT and Nuclear Disarmament-The U.S. View

Abstract: On the eve of its 50th anniversary of independence, India has puzzled other countries by its stance toward the elimination of nuclear weapons Although India has historically championed the objective of global nuclear disarmament, its efforts to obstruct the recent Comprehensive Nuclear Test-Ban Treaty (CTBT) have sent mixed signals to the international community This article will discuss concerns regarding the potential proliferation of nuclear weapons in South Asia, provide the US perspective with respect to India's position on the CTBT and the security debate within India, and outline the approach most of the world is taking to achieve the ultimate global elimination of nuclear weapons Introduction Today, India is at an important crossroads, poised to expand its economic and political influence and play a larger role in world affairs One of the world's 10 big emerging markets, in the view of many economists India has the potential to achieve a 6 to 7 percent growth rate over the next several years The economic liberalization program it has undertaken has begun to expand India's international trade and encourage foreign investment opportunities in areas such as power generation, telecommunications, roads and ports India seems to be intent on improving relations with its Asian neighbors In December 1996, India concluded a historic water-sharing agreement with Bangladesh, putting an end to 25 years of disagreement This followed a November water-sharing agreement with Nepal India is now a full dialogue partner with the Association of Southeast Asian Nations (ASEAN) and a member of the ASEAN Regional Forum It hopes to become a member of the Asia-Pacific Economic Cooperation forum India has also endeavored to improve its relations with China The December 1996 visit of Chinese President Jiang Zemin to New Delhi both highlighted this improvement and produced a 12 point agreement designed to expand confidence-building measures and reduce tension along the Indo-Chinese border Such developments should contribute to reducing India's long-term security concerns about China and help lay the groundwork for closer Sino-Indian economic cooperation It is too early to judge the success of resumed dialogue with Pakistan, but here too, prospects look favorable Each of these developments demonstrates India's potential to become a leading actor on the world stage Despite these many positive factors, the international community is perplexed by the mixed signals India has been sending on the nuclear disarmament issue For more than 40 years, Indian leaders have championed nuclear disarmament It was Jawaharlal Nehru who in 1954 first called for a ban on nuclear weapon testing and on fissile material production for nuclear weapons(1) Yet in September 1996, New Delhi sought to block the completion of the comprehensive test ban and said it would not sign the Treaty Since then, India has tied its support for other multilateral steps toward disarmament to an agreement to negotiate disarmament in a timebound framework To many of India's friends, this apparent shift is puzzling Just as the international community has begun to move in the direction India has advocated for decades, New Delhi appears to be unwilling to join in steps, such as the test ban, that are widely recognized as critical to the nuclear disarmament process India's stance is all the more puzzling because of its longstanding role as a champion of disarmament within the NonAligned Movement For years, India has led Non-Aligned Movement efforts to promote disarmament and to complete intermediate steps such as a CTBT and a cutoff of the production of fissile material for use in nuclear weapons Yet today, while India appears unwilling to embrace such agreements, the majority of Non-Aligned Movement states have chosen to work with the international community to achieve practical progress on the disarmament agenda Japan's victory over India for a rotational seat on the U …