Privatization in Developing Countries: A Promising Development Strategy?


This paper analyses privatization as one of development strategies in developing countries. In the last two decades, there has been an increasing trend of privatizing state owned enterprises (SOE) in developing countries. This paper clarifies that the process to decide the implementation of privatization in a developing country is a complex issue. The decision to privatize is not merely weighing the potential benefits of privatization, but also requires consideration of the circumstances of the country itself. The prerequisite circumstances of privatization in developing countries, including macroeconomic stability, the large role of the private sector, and low corruption level, will be discussed.

[1] Asian Development Bank 1985, An International Parley on ’Privatization’, American Journal of Economics and Sociology, vol. 44, no. 3, pp. 257-260, viewed 4 July 2007,

[2] Banerjee, SG & Munger, MC 2004, ‘Move to Markets? An Empirical Analysis of Privatization in Developing Countries’, Journal of International Development, no. 16, pp. 213–240, viewed 5 July 2007,

[3] Megginson, W 2000, ‘Privatization’, Foreign Policy, no. 118, Spring, pp. 14-27, viewed 6 July 2007,

[4] Smith, DAC & Trebilcock, MJ 2001, ‘State-Owned Enterprises in Less Developed Countries: Privatization and Alternative Reform Strategies’, European Journal of Law and Economics, no.12, pg. 217-252, viewed 6 July 2007,

[5] World Bank 1995, Bureaucrats in Business: The Economics and Politics of Government Ownership, New York: Oxford University Press.