Privatization and foreign investment in the developing world, 1988-92

Frank Sader

No 1202, Policy Research Working Paper Series from The World Bank

Abstract: Foreign direct investment in the developing world has grown rapidly in recent years, making it one of the most important sources of financing to developing countries. The author presents a database on about 1,100 global privatization transactions from 1988 through 1992. Between 1988 and 1992, developing country governments earned almost US$62 billion in revenues from the sale of state-owned assets. About a third of those revenues came from foreign sources. Privatization in Latin America represents about 66 percent of privatization in the developing world. Privatization in Europe, including Eastern Europe, accounts for 17 percent, and privatization in East Asia, 13 percent. The heaviest foreign participation is in Eastern Europe, primarily for lack of domestic financing. Foreign investors'general participation in privatization programs was strong, providing developing countries with substantial amounts offoreign exchange. The relative size of the privatization program and the degree of openness to foreigners are important determinants of foreign direct investment. Each dollar in privatization revenue generates an additional 35 cents in new foreign direct investment inflows, and a 1 percent increase in foreign participation adds another 50 cents. In addition to the direct inflow of funds through the sale of assets, many developing countries also increasingly attracted foreign investment outside of their privatization programs. Privatization of infrastructure and the financial sector especially seem to have sent important signals to foreign investors, indicating an improved economic environment and possibly the eventual elimination of bottlenecks. Improved expectations about the profitability of investment projects render these countries more attractive to foreign investors.

Keywords: Banks&Banking Reform; Municipal Financial Management; Environmental Economics&Policies; International Terrorism&Counterterrorism; Economic Theory&Research (search for similar items in EconPapers)
Date: 1993-10-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... d/PDF/multi_page.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:1202

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().