Introduction

There are lots of debates about whether government should privatize our public corporations because of their dismal performances. I am not opposed to privatization; in fact, I think privatization can be significant. However, I believe that privatization should be the end game and not a rushed solution to the horrible management we have seen over the years of our public corporations. In an earlier article, “Using Six Sigma to Reinvigorate Public Corporations”, I highlighted the need to make our public corporations operationally viable by using measurement tools to highlight the inefficiencies in their operations. I also proposed in that article the establishment of a National Public Corporation Commission or maybe strengthening the Bureau of State Enterprises to help the various public corporations achieve financial and operational excellence through the introduction of “Six Sigma” or some other measurement systems.  

Liberia needs a public oversight body to help manage the risks at our public corporations; boards of directors will not cut it in the Liberian setting as they in themselves are a financial burden. I applaud the government for trying to provide some form of oversight of our public corporations, but we need to move pass the board of director concept and develop a real oversight body and provide it with the teeth to provide risk assessments of public corporations. This watchdog body will develop the framework for measurement that is consistent across public corporations. This group would perform quarterly reviews of the financial and internal processes at the various public corporations with the goal to make recommendations and ensure their implementation.  

Let’s take for example, procurement as an internal process. Is there a “procure to pay” system in place? In other words, can a check payment for a good or service tell a story? Can an auditor pick up a check and verify that the purchase order     (PO) matches the receiving document and that both the PO and the receiving document match the invoice from the supplier? And does the PO, the receiving document and the check match? Can an auditor reach the conclusion that the corporation receives and pay for what it requested from a supplier? I am not trying to be simplistic here, but this is the depth of review that this watchdog should be empowered to perform. 

In the absence of an effort to make our public corporations viable by hiring the best managers with modern day experiences, we risk privatizing at our peril. The government must first consider other potentially viable alternatives.   

What is Privatization?

Privatization is generally when government enters an agreement with a private sector firm to produce and/or provide goods and services that previously were provided by the public sector. Privatization decision can not be made in a vacuum nor can they always be determined exclusively in terms of the relative efficiencies or effectiveness of alternative goods and service delivery systems. There are other considerations for government to make before it contracts a private sector firm. Because whenever goods or services are privatized, it should be of priority concern to governments that there be unbroken transition and ongoing continuity in their production or provision. Would the good or service being privatized to a private firm required government oversight? With those concerns in mind, government must ensure that the agreement account for all legal, financial and administrative liabilities. The agreement should also provide remedies in the event of non-performance, bankruptcy, and other unforeseen problems by the private firm. For example, what happens when a privatized Liberia Telecommunication Corporation goes bankrupt?  How will it be held accountable and the public interest ensured as a result of such failure?

So, To Privatize or Not

Frankly, I do not know whether or not we should privatize or which public corporation should even be privatized. What I can say is before we decide to privatize a public corporation; we better assess the costs against the benefits. I am not opposed to privatization, but as you can tell that I am not excited either. I do; however, believe that some public corporation should be privatized if their statuses depended solely on their current level of efficiency. That is, if we ignore the argument that our public corporations can do better and become operationally sound if we change management, provide strong public oversight and monitor progress against performance metrics.

Notwithstanding the argument to strengthen our public corporation, I believe the best criterion for deciding whether or not to privatize a public corporation, is to ask whether the country; the people, the economy, will be better or worst off in the long-run as a result of privatization. Because with the decision to privatize, comes the conclusion that government  no longer needs to be in control of all the means by which a product or service is obtained or delivered. 

The Malaysian government for example, decided to put on hold the privatization of the water sector because of regulatory weaknesses and the resulting excessive profits and adverse impact on consumers in the form of high water taxes. The study also found that while the Malaysian government’s decision was a correct one, it should not discount entirely the possibility of privatizing the water sector in the future. The study provided, “the benefits from privatization can be harnessed in the future provided that we are able to put in place a good regulatory framework and institution”.

Final Thoughts 

I agree with the conclusion of the Malaysian study that the success of any privatization effort depends on a strong regulatory environment. Like Malaysia, Liberia lacks the regulatory capacity to handle the challenges related to privatization.  We need a comprehensive approach to overcome the challenges associated with privatization.  

To this end, I call for the establishment of a task force that comprises individuals of diverse professional background, to develop a national privatization policy, compile an initial list of privatization opportunities, describe how to overcome the challenges associated with privatization, and provide implementation support for key privatization initiatives.   

Let me conclude by making the same argument I made in the beginning, government must take concrete steps to improve the efficiency of public corporations before any privatization initiative is pursued.

ABOUT THE AUTHOR 

Andre Pope is a concerned Liberian that works in financial planning and analysis and controllership in the Atlanta area. The author has taught economics at the University of Liberia and most recently served as an adjunct at the National American University teaching accounting and management. He lives with his family near Atlanta and can be reached at andrepopep@yahoo.com.