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This paper examines the role that privatization can play within a wider strategy designed to overcome the problems associated with public enterprises. It briefly reviews the arguments used to support public production and nationalization, discusses the performance of public enterprises, and identifies the problems to which privatization can be seen as a direct response. These problems include the tendency for politicians to interfere in public enterprise operations; the inability of politicians and civil servants to monitor enterprise managers effectively; inappropriate managerial incentives; and the availability of financial support from the government with only limited constraints.
Publisher: International Monetary Fund