In the aftermath of the financial crisis, emerging countries, which previously had been moving actively to sell off state-owned assets, are expected to switch to more cautious and selective approaches to privatization. But their thinking on this matter is not uniform; we can classify their approaches into four categories as set forth below.
The first category consists of countries that have fallen into severe fiscal straits as a result of the economic crisis and that need to sell off state-owned assets in order to help fill the gap in public finances. For example, in 2010 Poland will seek to sell some $12.8 billion worth of assets in such areas as telecommunications and energy, while Ukraine has expanded the number of enterprises to be privatized from 135 to 365, primarily in the areas of communications, fertilizer, and heavy electric machinery. South Korea is expected to privatize the Korean Development Bank and also to sell off government-owned shares in Hynix Semiconductor Inc., Hyundai Engineering and Construction Co., and Daewoo Shipbuilding & Marine Engineering Co. In India, some 30% of state-operated enterprises are constantly in the red, and the government is planning to divest some of its shares in Oil India, the National Hydroelectric Power Corporation—India, and other companies.
The second category consists of countries that find themselves impelled to postpone plans for privatization in the face of the deterioration of market conditions resulting from the global financial crisis. These include China, the Philippines, Thailand, and Turkey. At present they find conditions unfavorable for selling off state-owned assets, since potential investors face difficulties raising funds, total market capitalization has shrunk, and the appetite for investment has weakened. But they are expected to resume their privatization moves if and when the environment becomes more favorable.
China has been working to strengthen the operations of its major state-owned enterprises to prepare for a global economic recovery, and there are signs that the preferential treatment of SOEs in the provision of funds is putting a crimp on financing for private-sector businesses, a phenomenon known as guojin mintui, meaning "the state sector advances as the private sector recedes."
In the third category are countries that face not only the effects of the financial crisis but also strong underlying domestic resistance to privatization predating the crisis. These include Indonesia, Malaysia, Mexico, and Vietnam.
The final category consists of those countries where the state is stepping up its involvement and there are no privatization moves on the economic policy agenda. Notable examples are Argentina, Brazil, Russia, and South Africa. In some of them, such as Brazil, moves toward resource nationalism can be seen. In Russia there is a pronounced tendency toward strengthening the state's involvement, but at the same time there are also moves to secure revenues through the sale of shares owned by the state in the face of the pinch in government finances.
