Tuesday, July 13, 2010

TO PRIVATISE OR NOT TO PRIVATISE?

The privatization of Entebbe International Airport has been in the news recently. Details are a bit hazy but the essential details are that parts of the government are pushing for the leasing of the airport assets, to a Dubai concern. The deal has blown up into a fullscale scandal because it seems as if the Transport and Works ministry which oversees the airport was not in the loop and the seemingly flawed sourcing of the Dubai group.
Also in the news is the investigation launched by Energy Minister Hillary Onek’s into high power tariff’s. Power distributor UMEME, a private operator who is leasing Uganda Electricity Distribution Ltd’s (UEDCL) assets, may very well be at the center of the investigation. UMEME has been a lightening rod for all criticism surrounding the power sector and the target of cheap shots by grandstanders and showboaters.
The issue of whether to privatize or not was resolved nearly 15 years ago, when President Yoweri Museveni called a closed meeting of the then National Resistance Council and cajoled them into passing legislation to support privatization. Since then the privatization and the parallel of liberalization has wound a jerky, start-stop course that has seen the successful and unsuccessful sale of several public enterprises, claimed many careers and changed the business landscape.
The idea behind the principle of privatization is that by shifting enterprises out of government hands into the private sector greater efficiencies will be achieved, greater production will achieved, eventually more jobs will be created and higher taxes will be raised. It has been hard to argue with the result when the process has been successful but it is the howling failures – few and far between, that have given much ammunition to the detractors of the process.
There are generally two kind of critics of the principle those who believe that government needs to be involved in the economy beyond a regulatory role to direct the economy for the benefit of the citizens and those who see privatization as synonymous with selling out to foreign interests ad therefore an anti-nationalist policy.
Generally it can be said that the free market is the most efficient creator of wealth in as far as it responds to demand to supply needed goods and services. But he private sector will not move if the demand is not sufficient to justify supply, so unless you are unlikely to see Rolls Royces being assembled in Uganda in your life time. Government corporations while they are supposed to be profitable normally get bogged down in political and social issues that are often detrimental to profitability and efficiency. And the tax payer ends up paying for these inefficiencies.
For a country like Uganda privatization probably did not come soon enough. What privatization does is unlock the value of unused assets. So for example UCB’s huge branch network was working at less than optimal efficiency but now these same branches are providing much better services to the community through improved operations and greater automation. It does not take years to get a telephone line from UTL anymore. And you do not have to know a well placed official in the trade ministry to buy beers from Nile Breweries or sodas from Crown Beverages.
So Entebbe airport should be privatized. And we shouldn’t stop there we should privatize Makerere University, National Water and Sewerage Corporation, Mulago and KCC. The role of the state should be restricted to security and regulation.
One can understand the disquiet at the process. Going by what has been revealed one gets the distinct feeling that these national assets are not being treated as such, but like gambling chips at the casino. It is not a leap of imagination to believe that the only reason one would use underhanded methods to sell our assets is because these deals would not stand up to open scrutiny, would be bad deal going forward and chances are would join the heap of other ill conceived privatisations.
There is universal doubt about the moral fibre of our public officials, which is all the more reason we should privatize now and privatize everything before they get their grubby fingers on them.

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