Privatization of Tobacco Monopolies

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Privatization of Tobacco Monopolies

• By
• Ayda A. Yurekli, Ph.D
• World Bank

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PRIVATIZATION

• 1980-1991, roughly 6,800 medium- and large-scale
  firms were privatized in non-transition economies
• Close to 60,000 such companies were privatized in
  the transition economies since independence
• Source World Bank, John Nellis

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Why to Privatize

• Economic Unsatisfactory economic performance of
  state-owned-enterprises (SOEs)
• Inefficient (costly) production
• Cost on government revenues
• Political
• Change in political systems,
• new international trade agreements,

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Impact of privatization

• Macro Economic Perspective
• Fiscal Perspective
• Micro Economic Perspective
• Public Health Perspective

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Evidence from SOE privatization

• Profitability
• Efficiency
• Output
• Investment
• Employment
• Returns to Government
• Welfare Change
• (79 Firms in 21 LDC, (1998) 218 Mexican
  Privatization, (1997), 81 Firms in Ivory Cost
  (1999),

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World Bank, IMF and Privatization

• The World Bank takes the lead in
  privatization
• and
• the IMF cooperates closely with it in this
  area.

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Privatization of Tobacco Monopolies from Public
Health Perspective

• Privatization could lead to increased rates of
  smoking which contribute a deterioration in
  public health
• Publicly held tobacco monopoly could suffer from
  insufficient regulation and thus higher levels of
  smoking

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How much of increased sales contributed by the
privatization

• Regulatory system
• New trade agreements
• Price and tax systems
• Governments incentive and power
• Development process

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THE SIX COMMANDMENTS OF PRIVATIZATION

• 1-Thou shalt instill competition
• 2- Thou shalt make all transactions transparent
• 3- Thou shalt establish a regulatory framework
  before you privatize
• 4- Thou shalt move quickly
• 5- Thou shalt keep the citizens informed, at
  every step along the way
• 6- Thou shalt make the workers partners in the
  privatization process by John Nellis

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