A Comparative case study on the experience of privatization in UK, Korea and Japan and implications to China SOES reform
Xuan Li · KDI Central Archives (Korea Development Institute) · 2001
This paper, first, reviews the theoretical framework of privatization with special concern over property rights and competitive nature of the market.It examines economic implication of property rights and suggests different policy implications under different market conditions.Through empirical studies of privatization in United Kingdom (UK), Japan, and Korea, it illustrates the gains from privatization.It also stresses the lessons learnt for future privatization process and policies.In addition, it reviews the recent Chinese reform programs including the ones of the state-owned-enterprises (SOE) and the financial sector.This paper argues that, without proper transfer of property rights, inefficiencies will remain and Chinese SOEs will continue to be a heavy burden on the national economy.Lastly, some policy suggestions for the future reform on the Chinese SOEs will be discussed.role in improving efficiency.The allocation of property rights determines the objectives of the "owners" of a firm and systems of monitoring managerial performance.Public and private ownership differs in both respects, as a result, changes in property rights will materially affect the incentive structures, and hence the behavior of management.This result yields some policy implications concerning the relationship between transfer of property rights by privatization and efficiency improvement as well as the state's use of monopoly power.In addition, analysis of the imperfect market conditions also yields important policy implications on monopoly regulation.Chapter II introduces experiences of privatization in three selected countries , i.e.United Kingdom (UK), Japan and Korea, which are at different stage of privatization process and whose experience could serve as useful references for other countries.Considering the economical relationship and geographical location, privatization process in Japan and Korea's development will provide special insights for their neighboring country, China.In each case, the main characteristics of the country and industries concerned are outlined first before evaluating the policy changes that have been implemented in these countries.The common themes will serve to link the individual case studies with the theoretical perspectives developed throughout this chapter.In the case of UK, its experience shows that privatization has generally improved consumer welfare via a combination of higher quality and quantity of output and lower prices.UK is considered a pioneer in introducing the price cap regulation to privatize the utility industry.The RPI-X method has been examined to present its advanced application through UK Water's twostage privatization process.In the case study of Japan, two privatization cases are highlighted: Japan National Railways and Nippon Telegraph and Telephone Public Corporation. Increased competition after privatization