What is privatization?

From 50 Years is Enough campaign and Voices for Haiti, 5 February 1996

One of the main components of the International Monetary Fund/World Bank Structural Adjustment Program for Haiti is privatization of state-owned industries (including two banks, a flour mill and cement factory), utilities (the electric and telephone companies) and infrastructure (seaports and airports). The term refers to selling public assets to private owners, usually through an auction style bidding process. According to the IMF and World Bank, privatization helps impoverished countries in two ways: 1) it allows the government to shed unprofitable, hard-to-manage industries and reduce spending (thus freeing up cash for debt repayment and other needs) and 2) it subjects the privatized industries to the competitive private sector which should improve the delivery of services. In theory, privatization ensures that the public will benefit from industries participating in a dynamic, free- market business environment. The World Bank information campaign in Haiti refers to this process as Asset Democratization. While privatizing certain industries may improve the efficiency of the government, in practice, blanket privatization of all state-owned resources rarely benefits local people and often serves to widen the gap between rich and poor.

WHY ARE HAITIANS WORRIED ABOUT IT?

1) Most private owners are seeking to maximize profits, not provide comprehensive service and maintain community infrastructure. For example, in 1987 the Haitian government, at the urging of the World Bank and IMF, privatized its sugar processing facility. The new owners immediately closed the plant, fired the workers and began importing cheaper sugar from the United States and selling it at a higher price than local sugar. The plant's workers, the sugar farmers and the truck drivers who transported the raw cane to the plant for processing all lost their jobs. Importing sugar from the U.S. was profitable for the new owners but local communities suffered and the Haitian sugar industry was decimated. In a final blow, local citrus farmers are now finding it difficult to sell their produce as the market for citrus juices drops with the rise in the price of sweetener.

2) In poor countries, there are very few private investors with enough resources to buy a state-owned industry. Most are bought by transnational corporations (TNCs) who have little interest in the needs of the local population; this process results in money and resources leaving the country. For example, in many countries privatizing their telephone companies, thousands of state telephone workers lose jobs as they are replaced by cheaper automatic systems (in much the same way as AT&T's recent layoff of 40,000 U.S. workers). TNCs rarely have an interest in increasing basic services for marginalized communities but instead focus on more profitable specialized services for business clients and other TNCs. Many state-owned utilities could be very profitable, efficient and still serve the needs of local communities. Haiti's telephone company was so profitable that income from the utility ran the exiled government of Jean-Bertrand Aristide during the 1991-1994 military coup.

WHAT CAN WE DO TO HELP?

As part of Aristide's agreement with the U.S. government and others for help ending the coup, he agreed to privatize nine state- owned industries. But the people of Haiti are resisting efforts to privatize any industries without an open, public debate on the merits and problems of privatization. The World Bank with the support of the U.S. Agency for International Development has paid $900,000 to a for-profit Canadian public relations firm to inform the Haitian people about the benefits of privatization. US AID is witholding $4.6 million in aid until the government begins to privatize these industries. Please write or call US AID and demand the release of the aid dollars and assurances that all options (including renting, leasing, creating worker-owned cooperatives, management contracts or not privatizing) remain on the table for discussion. Talking points for your letter or call are on this page. Please send the 50 Years Is Enough Campaign a copy of your letter, we will send your letters to our partners in Haiti to help in their campaigning and to all relevant persons in the US AID, the Treasury Department, the State Department and the World Bank.

SEND LETTERS TO: BRIAN ATWOOD, ADMINISTRATOR U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT 2201 C STREET NW ROOM 5942 WASHINGTON, DC 20523 FAX: (202) 647-0148

SEND A COPY TO: U.S. 50 YEARS IS ENOUGH CAMPAIGN 1025 VERMONT AVE, NW SUITE 300 WASHINGTON, DC 20005 FAX: (202) 879-3186 E-MAIL: WB50YEARS@IGC.APC.ORG

In your letter you should:

DEMAND that US AID and the World Bank cease pressuring Haiti to privatize its state-owned industries. US AID should restore the 4.6 million dollars in aid to Haiti cut in December 1995 due to the Haitian people's unwillingness to privatize.

DEMAND that US AID cancel the $900,000 propaganda campaign promoting only one version of privatization. This attempt to manipulate Haitian public opinion with US taxpayer dollars is unethical and constitutes direct interference in the democratic political process of another country.

Use any or all of the following arguments:

1) US AID's cutoff of the $4.6 million in aid money has contributed to the destabilization of the Haitian economy which caused the Haitian currency to lose value. This in turn caused the price of basic goods to rise. Furthermore, this destabilization has also undermined Haiti's ability to attract private investment.

2) Forcing privatization undermines the democratic political process.

3) The World Bank and US AID are not living up to their stated commitment to support the government's program of asset democratization in Haiti, which includes measures to ensure that privatization will not increase concentrations of wealth or power in the hand's of Haiti's elite (who supported the military coup). The World Bank's IFC studies of the state-owned industries should be released to the general public to encourage popular debate and democratic decision making.

4) Haiti's telephone company provides crucial revenue to the government and should not be privatized. The company generated $71 million of foreign exchange last year and the World Bank's own estimates indicate that this could increase to $150 million. Since the government is dependent on foreign exchange it should not be forced to give up this revenue. 5) Haiti's state-owned industries are vital to just and equitable development. Private ownership can discourage sound policy planning in favor of higher profit-margins. For example, a policy for extending electrical service to rural areas must be created and any energy policy for Haiti should consider Haiti's environmental crisis in addition to profit-making concerns

6) The World Bank should remember its own review of the privatization experience in scores of poor countries over the last 15 years which warns of the danger of badly managed, premature sell- offs. Haiti lacks institutional structures which are necessary to successful privatization.

7) There is no reason to privatize all industries in Haiti, since the enterprises in question, when taken as a group, still contribute a surplus profit to Haiti's government. Each industry should be consedered for privatization on its own merits and deficits, not as part of a group.