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II. Privatization Process: Making Privatization Work - Key Issues & Approaches |
With all the factors discussed above in mind, certain specific steps have emerged as most likely to achieve success. This section discusses what these steps are, why they are taken, and how they are advanced.
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A. An Open and Transparent Process |
It is important to establish an open and transparent privatization process that is organized by the country's privatization agency, with the assistance of experienced international investment bankers. To ensure that the final list of bidders is limited to qualified strategic investors, it is important to subject all potential bidders to a prequalification process using stringent financial and operational criteria. A prequalification round is efficient, screening out entities that do not possess the financial capability, successful commercial experience; operational, technological and managerial expertise and. experience needed for the development of the region's power systems. Bids that are received in the second round of the pre-qualification screening come from companies that possess the requisite capabilities necessary to meet the objectives of the privatization as outlined by the country in its tender documents. Such a two-tiered process, with a pre-qualification round first, allows the country to concentrate its efforts more efficiently, by focusing on attracting bidders in the first round, then meeting the qualified bidders' due diligence needs in the second round.
While the existence of a workable legal and regulatory framework is critical, this need should not lead to delay. Perfection is never achievable, so the government should not wait forever, fine-tuning its laws, before going forward.
Nor should the government attempt to micromanage through its laws and regulations. Flexibility must be maintained in order to respond to individual situations as they arise.
For example, it probably does not make sense to include an immutable timetable and detailed procedures in the laws and rules governing a privatization. Certain overall parameters are helpful, but room must be left for flexibility and to extend a deadline if warranted under the circumstances.
Finally, as discussed above, experience teaches that the regulator should be as independent and knowledgeable as possible. Investors want regulators who will not be beholden to short-term political demands. The more competent a regulator, and the more divorced the regulator is from the political concerns, the more likely an investor will gain confidence in the legal environment, increasing its interest in participating in a privatization. As a key player, the regulator should be involved in the privatization process from the beginning. It should play a role in determining the market structure and in identifying the objectives of the privatization.
The regulator should not choose the winning bid. It must maintain its distance during the privatization process to ensure that it does not compromise its regulatory autonomy.
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Table
of contents |
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I. Power Sector Privatization |
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II. Privatization Process |
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Conclusion |
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