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Privatization Alive And Well - Abroad

April 20, 1989

NEW YORK (AP) _ Back in the mid-1970s when Robert Poole Jr. was developing the notion of private enterprise being able to do government’s work better than government, he could hardly have foreseen one of the twists that ensued.

The concept seemed to thrive in the United States. Organizations were formed to promote it. It was embraced by President Reagan. New laws encouraged private initiative. The White House named a director of privatization.

But while the concept thrived domestically, action did not always follow. Surprisingly, much of the privatization developed abroad, in Japan and Britain, and incredibly, in the big-government communist world.

Meanwhile, Poole has continued to develop his ideas, mainly through the Reason Foundation, an organization he founded in Santa Monica, Calif., and which he still runs. Each year it publishes a progress report on privatization.

The latest, just issued, reports that governments around the world continue to shift functions and responsibilities to the private sector, to the extent of $43 billion of sales in 1988 alone.

That amount brought the worldwide cumulative total to $160 billion in just five years, and in almost every instance the basic notion was the same, that private initiative could result in more efficient management and services.

In 1988, Britain relieved itself of an obligation and fattened its treasury by selling British Steel to private investors. Japan sold off Nippon Telephone & Telegraph for the same reasons.

The Third World, struggling to survive in a more competitive world market, recognized the possibilities. Nigeria issued a decree that will result in the sale of 67 companies, including 12 banks. Chile plans to sell the government pension fund, and has already sold $1 billion in state firms since 1985.

Asset sales tell only part of the story. Increasingly popular are Build- Operate-Transfer agreements whereby a private company agrees to build and operate a public facility for the government for a set time period.

B-O-Ts are being used to build a major power plant and rail transit system in Turkey, a new harbor tunnel in Sydney, Australia, and power plants in the Phillipines. And, in of all places, a 181-mile tollway in China.

Surprising? Not really. Privatization is being widely embraced by nations that once felt it was the function of government to operate all enterprises.

The Soviet Union has joined China in allowing farmers to lease land from the state and buy their own trucks, tractors and equipment. Both have begun programs allowing individuals to buy houses and apartments from the state.

Several communist countries are permitting private buusinesses to start up. Hundreds of co-ops were begun in the Soviet Union in 1988. Poland has gone further, with 23,000 co-ops authorized, each allowed to hire 50 workers per shift. Hungary now permits private companies employing up to 500 workers.

The Soviet Union is in the process of breaking up of many collective farms and the leasing farm land to individuals, families and small groups. The report states that one-fifth of the country’s 50,000 farms have been leasing land and equipment to individuals and families over the past two years.

In contrast to these efforts - all of which promote the belief that private initiative results in more efficient production and delivery of goods and services - is the United States, which the report states ″is virtually alone in having no serious national commitment to privatization.′ ′

During the entire eight years of the Reagan administration, it states, the only large federal enterprise to be sold off was Conrail.

There was additional action, but hardly enough to support the rhetoric. During 1988 the government reached an agreement to sell the Great Plains Coal Gasification plant for $600 million over 21 years. And $4.6 billion was realized from the sale of federal loan assets in 1987 and 1988.

A presidential commission has recommended using various form of privatization, including contracting jobs rather than doing them in-house, the direct sales of assets and other means to alleviate budget pressures.

And a Reason Foundation task force recommends the privatization of Amtrak, the Tennessee Valley Authority and other power facilities, the U.S. Postal Service and the nation’s airports and air traffic control centers.

Will it happen? The lack of momentum suggests it won’t occur for a long while. While President Bush has said repeatedly he supports the concept, privatization advocates fear the White House effort is being downgraded.

What an oddity, say those who support privatization: The United States, which symbolizes private initiative and taught it to much of the world, is now showing less initiative than some third-world and Communist nations.

End Adv PMs Thursday, April 20

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