The Dead Hand of Socialism: State Ownership in the Arab World

Countries of the Middle East and North Africa (MENA) need to implement privatization in order to sustain their transitions toward more representative political systems and inclusive economic institutions. Three main lessons emerge from the experience of countries that have undergone large privatization programs in the past. First, the form of privatization matters for its economic outcomes and for popular acceptance of the reform. Transparent privatization, using open and competitive bidding, produces significantly better results than privatization by insiders, without public scrutiny. Second, private ownership and governance of the financial sector is crucial to the success of restructuring. Third, privatization needs to be a part of a broader reform package that would liberalize and open MENA economies to competition.

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