Privatization: Between Saving the Economy and Selling the State

In contemporary economic thought, privatization is no longer merely a process of transferring public institutional ownership to the private sector or a means to provide urgent financial resources for the public treasury. It has become part of redefining the state's role in the economy and rearranging the relationship between ownership, efficiency, productivity, and the public interest. While some economic schools view it as a way to improve performance, liberate resources, and introduce market mechanisms, perhaps the old Arabic proverb 'Sa'd brought them, while Sa'd was wearing a cloak' captures part of this paradox; the existence of a resource does not necessarily mean it is well-utilized, and having access to an asset does not in itself represent success in managing it. In economics, a public asset might be loss-making due to poor management and the institutional environment, not because of the nature of the asset itself. Transferring its ownership to the private sector may constitute economic reform when preceded by restructuring, fair valuation, governance, and effective competition, but it could also turn into a mere disposal of public wealth if those conditions are absent. Egypt is one of the most prominent Arab examples that has undergone extensive programs for restructuring and privatizing public institutions since the 1990s. The experience included selling shares in companies via the stock exchange, offering shares to strategic investors, and other sale operations for institutions and employees under various formulas. These policies were linked to economic reform programs and a shift toward expanding the role of the private sector, as comparative studies indicate an improvement in profitability and operational efficiency indicators for a number of companies that were privatized in Egypt and other countries in the region, with results varying according to the sector, ownership structure, and the nature of the reforms. However, the Egyptian experience also highlights the importance of governance, transparency, and the protection of competition; privatization in an environment where political and economic interests overlap may lead to the concentration of wealth or the creation of preferential relationships between authorities and businessmen. The lesson learned from Egypt is not to adopt or reject privatization absolutely, but rather the necessity of building independent institutions for asset valuation, disclosing the terms of sale, ensuring competition, reviewing social impacts, and not turning public institutions into political or financial spoils. South Africa, Ghana, Kenya, Uganda, and Tanzania offer various models for reforming public institutions and expanding the role of the private sector. However, comparing them requires taking into account the differences in the nature of activities, the level of governance, political and economic stability, and the state's ability to regulate markets. Therefore, benefiting from these experiences requires understanding their specific circumstances, rather than just importing their models. The water, electricity, and transport sectors stand out in particular because they demonstrate that changing the owner does not necessarily mean improving the level of service or reducing costs. In the absence of competition and effective oversight, a public monopoly can turn into a private monopoly, while the cost of poor efficiency remains borne by the consumer. That is why the most complex experiences were linked to the need for clear legislation, tariff regulation, ensuring competition, independent oversight, and consumer protection mechanisms. In the same context, Morocco and Tunisia offer examples from North Africa of different paths for restructuring public institutions and expanding private sector participation. Morocco has moved toward transferring the ownership of several institutions and expanding the role of the private sector in industry, services, and some strategic activities, while Tunisia has also seen programs for restructuring and disposing of a number of public institutions. The two experiences reveal, despite their different circumstances, that moving some activities from the state to the private sector requires more than just transferring ownership; it requires clear regulatory frameworks, transparency in procedures, genuine competition, and institutional capacity to protect the consumer and monitor service quality. In this sense, African experiences, from the south and east of the continent to the north, converge on a fundamental lesson: reform is not measured by the volume of assets that have exited state ownership, but by the extent of improved efficiency, sustainability of service, and the achievement of economic and social interests. Therefore, the success of any process to redistribute economic roles is not linked to the volume of assets the state gives up, but to its ability to determine what should remain within its scope, and what can move to the private sector, while providing clear rules for competition, transparency, and accountability. An effective state is not necessarily one that owns all institutions, nor is it one that gives up everything; rather, it is one that can achieve a balance between ownership, regulation, oversight, and the public interest. In the Arab Gulf, the story seems quieter than what meets the eye. The state did not enter the economy out of necessity alone, but for long periods, it was the one that created many of its gateways; it built institutions, financed infrastructure, established companies, and pushed entire sectors into existence. Then came a time when the issue was no longer about building the economy, but about rearranging its components. In the United Arab Emirates, some institutions that originated within the state began to gradually turn into entities with a global reach. Ports, aviation, logistics, tourism, and investment are no longer just internal sectors, but have become platforms for growth and expansion beyond borders. With this shift, the nature of the institution itself changed; from a tool for implementing economic policy to an entity searching for efficiency, competition, and markets. In the Kingdom of Saudi Arabia, the transformation took on a broader dimension, with the rearrangement of a number of assets and companies, the expansion of private sector participation, and the development of new sectors outside traditional oil activity. Government capital began to move in a different way; not only to build institutions, but to redirect investment toward sectors that could carry a larger part of the economy's future. Bahrain followed a path more linked to services, the financial sector, and commercial activities, taking advantage of its location and economic environment in an attempt to build more diverse sources of income in light of limited oil resources compared to some countries in the region. In Qatar, energy revenues created a broad financial base that allowed for the building of institutions and investments with international reach, in parallel with the development of aviation, logistics, tourism, and service sectors. Here, oil wealth is no longer just a resource for the treasury, but has gradually transformed into capital that is redeployed in building a broader economic presence. As for the Sultanate of Oman, its formula was more linked to the need to diversify the economy and expand the production base, so ports, logistics, mining, industry, tourism, and fisheries emerged as new areas for growth, with the state continuing to play a pivotal role in planning, infrastructure, and strategic sectors. Despite the different paths, a single thread runs through them all. The state no longer views its ownership of assets as the end of the road, nor does the presence of the private sector mean the absence of the state. Old boundaries between owner, investor, regulator, and partner have begun to overlap more flexibly, and the economy has begun to move in a new space where roles are multiple and the functions of capital are changing. Here, the uniqueness of the Gulf experience appears. The state did not withdraw from the economy but rearranged its position within it. In some areas, it moved from direct operation to investment, from daily management to governance, and from owning assets to managing a broader portfolio of opportunities and sectors. This transformation makes the Gulf story different from the traditional privatization model. The scene is not based on the total abandonment of assets, but on redefining their economic function. A government company can become an investment arm, a public asset can be transformed into a platform for growth, and sovereign capital can operate outside borders and return with new revenues, expertise, and markets. Perhaps the deepest implications of the experience lie in the fact that ownership has become less important than the ability to create value from ownership. An asset that does not produce value remains a static asset, regardless of the name of its owner, while management, governance, and investment can give the same asset a completely different economic function. Thus, the Gulf transformation appears as a quiet transition from a stage where the state was building the economy to a stage where it is re-engineering the economy. The scene did not change all at once, and the state did not disappear from the picture; rather, its roles gradually changed, the space for the private sector expanded, and capital was redistributed among new sectors and markets. In this quiet region between ownership and management, between the state and the market, and between public and private capital, the features of a Gulf experience that is still evolving are being formed. An experience that cannot be summarized in one word, and cannot be measured simply by the number of institutions whose ownership has changed, because the deeper transformation took place elsewhere; in the way the state views its assets, and in the way the economy views its coming role. The Sudanese situation may differ from many Arab and African experiences due to the overlap between economic crises, weak institutions, political instability, the repercussions of war, and the decline of the productive and service infrastructure. In this context, talk of privatization cannot be separated from the issue of rebuilding the state and re-establishing trust between the citizen, public institutions, and the private sector. Since the 1990s, Sudan has witnessed trends toward reforming the public sector and privatizing a number of institutions, and Sudanese literature has recorded an interest in the risks of unsystematic application of privatization and the need for a clear strategy. However, evaluating every Sudanese privatization process requires referring to its original documents, data on assets and liabilities, terms of contract, and financial and operational results; it is not enough to pass a general judgment on the experience without distinguishing between sectors, institutions, and time periods. The fundamental problem in Sudan is that privatization may sometimes be presented as a quick solution to a budget deficit or to provide foreign currency, while rebuilding the economy requires a vision broader than selling assets. An institution sold under circumstances of economic turmoil, without fair valuation, or in the absence of competition and oversight, may turn into a source of long-term public loss, even if the treasury achieves a temporary revenue. Conversely, keeping loss-making or stalled institutions without reform is not a sound developmental option. Therefore, Sudan needs to classify its public institutions according to clear economic criteria: strategic institutions where control cannot be relinquished, institutions capable of being reformed and restructured, institutions that can be managed in partnership with the private sector, and economically unfeasible institutions that may require liquidation, merger, or repurposing. As for the Sudanese sectors with priority for reform and partnership, Sudan possesses vast potential in agriculture, livestock, ports, transport, energy, mining, food industries, and logistics. However, possessing resources does not translate into economic value except through investment in infrastructure, reform of legislation, provision of financing, protection of investor rights, and the building of effective production and distribution chains. In the agriculture sector, partnerships can be expanded between the state, investors, and farmers instead of simply selling agricultural assets. Management, operation, and joint investment contracts allow for the introduction of technology, financing, and expertise while preserving land rights and local communities. In ports and transport, concession or fixed-term operation contracts can be used, provided there are performance standards and independent reviews of tariffs, investment, and maintenance. As for the energy sector, partnerships with the private sector may be a way to attract financing and technology, but there must be an independent regulatory body, a clear tariff policy, and guarantees to protect vulnerable groups. Energy projects should also be linked to restarting productive sectors, not limited to achieving financial returns separate from the needs of the real economy. In mining, the priority is not to sell exploitation rights in an opaque manner, but to build a contractual system that guarantees the state a fair share of revenues, protects the environment, prevents smuggling, obliges companies to financial disclosure, and ensures that local communities benefit from economic activity. Applying the correct model of privatization for Sudan requires a gradual application based on diagnosis before decision. The process begins with a comprehensive inventory of public institutions, an assessment of their assets and liabilities, an analysis of their financial and operational performance, identifying the causes of losses, and studying the nature of the market in which they operate. Then, a comparison is made between reform alternatives: restructuring, merger, private management, partnership, partial sale, full sale, or liquidation. Public assets must be subject to independent and multi-criteria valuation, taking into account book value, market value, future cash flows, and strategic and social value. Basic information related to the sale or partnership should also be published, investor selection criteria defined, conflicts of interest prevented, and procedures subjected to legal and financial review. Competition is a central element in correct privatization. If an institution operates in a competitive market, transferring ownership may be more likely to succeed. But if it provides an inherently monopolistic service, such as some water, electricity, or infrastructure networks, the priority is to establish an independent regulatory system before transferring operation or ownership. Furthermore, a plan must be put in place to protect employees, including training, rehabilitation, fair retirement, and due compensation, and linking any restructuring to a program for creating alternative productive opportunities. Labor is not just a cost item in financial statements, but a social and economic element that must be dealt with as part of balanced reform. The results of privatization and governance and corruption prevention depend to a large extent on the level of governance. Transparency in valuation, contracting, and disclosure are not formal procedures, but guarantees to protect public money. There should be an independent entity to review assets, a supervisory body capable of examining deals, clear rules to prevent conflicts of interest, mechanisms for reporting corruption, and the possibility of challenging contrary decisions. These guarantees become more important due to the weakness of public trust in institutions, the multiplicity of power centers, and the repercussions of war. Therefore, privatization should not be carried out through exceptional decisions or unannounced arrangements, but through a clear law, institutions with specific jurisdiction, competitive procedures, and periodic reports showing what has been achieved of the goals. The state's role as an owner must also be separated from its role as a market regulator, and its role as a service provider. Mixing these roles may allow the state or related parties to favor one institution over another, prevent competition, or lead to conflicts of interest. Institutional separation is one of the important conditions for building a fairer and more efficient market. Also, privatization in Sudan should not be measured by the volume of funds entering the public treasury on the day of contracting. This indicator alone may be misleading; the state may achieve high revenue from selling a strategic asset, but it loses future revenues, productive capacity, or important regulatory influence. Evaluation indicators should include: the development of productivity, revenue growth, improvement in service quality, the volume of new investments, the level of employment, the impact of tariffs on citizens, the degree of competition, the volume of tax revenues, commitment to maintenance and expansion, and the extent of benefit to the local economy. Results should also be compared with what could have been achieved in the event of restructuring or improved public management, not just by the previous deteriorating situation. It is necessary that privatization and partnership contracts include clauses for periodic review, penalties for failing to meet performance indicators, and the possibility of renegotiation or termination of the contract in the event of gross breach. A successful contract is not just a long-term contract, but a contract that balances investor stability and the protection of the public interest. Privatization is not a ready-made recipe for economic advancement, and it is not an economic sin in itself. Rather, it is a tool of public policy, whose results depend on the environment in which it is applied, the quality of institutions, the clarity of goals, and the state's ability to regulate the market and protect rights. Arab and African experiences have shown that privatization can improve the performance of some institutions when accompanied by real reforms, but it may lead to monopoly, concentration of wealth, or decline in services when implemented hastily or non-transparently. As for Sudan, its need to rebuild the economy does not justify selling public assets without study, just as the conditions of war and crisis do not justify keeping loss-making institutions without reform. What is required is the establishment of a Sudanese model for privatization and partnership, based on the economic classification of institutions, independent valuation, governance, competition, protection of workers, and linking reform to the goals of production, employment, and reconstruction. Ultimately, the decisive question is not: who owns the institution? But rather: who manages it efficiently, who holds it accountable, who benefits from its revenues, and how does state ownership transform into sustainable economic and social value? If privatization will lead to a more productive, fair, and transparent economy, it may be a means of reform. But if it turns into an urgent sale of public wealth, it will be nothing more than a redistribution of loss under the name of development. Dr. Mohamed Sharaf al-Din al-Tayyib Ahmed Banking Expert mohamed.50000@hotmail.com