In the 1980s, most developing countries faced macroeconomic structural problems such as high inflation and increase in foreign debt. Most of the developing countries had to engage in Economic Reform and Structural Adjustment Policies (ERSAP) to meet the IMF and World Bank conditionality criteria for their assistance to overcome their economic problems. Privatisation was a major policy of the World Bank's ERSAP. Developing governments started to privatise their state-owned enterprises (SOEs). However, domestic investment in these countries was not enough to carry out the whole privatisation programme. Therefore, the need for FDI to participate in privatisation and close the gap between domestic saving and domestic investment became imperative. The approach to the application of privatisation and attracting FDI differed among developing countries. While some countries applied speedy privatisation and welcomed unlimited participation of FDI in the programme, others were more conservative in the speed of application and the acceptance of FDI participation. One of the factors that affected the speed of application and the participation of FDI is the institutional and regulatory frameworks applied in each country. This research explores the effects of privatisation and FDI on long-run economic growth during the era of intensive privatisation of the 1990s. Hence, the time period covered for this research is from 1971 to 2000. Case studies on the frameworks of privatisation and FDI in Egypt and Argentina are used to show how different institutional and regulatory frameworks affected the application of privatisation and participation of FDI and hence yielded different privatisation proceeds and FDI inflows. Egypt followed a slow and cautious approach to privatisation, and partial liberalisation of FDI regulations, while Argentina followed a speedy and aggressive approach to privatisation and fully liberalised their FDI regulations. As a result, Argentina had already completed 2/3 of its privatisation programme within the first 5 years of the programme, while Egypt took 10 years to privatise 2/3 of the SOEs participating in the programme. In addition, Argentina was more successful in attracting more FDI inflows to participate in the privatisation programme than Egypt. The effects on long-run economic growth are estimated using Error Correction Models for Egypt and Argentina over the period of 1971- 2000. Dynamic fixed effects models are also used for a sample of 47 developing countries over the period of 1988-2000 to obtain more generalised results for the developing countries. The results reveal that privatisation had positive effects on economic growth during the privatisation era. The effects of FDI on economic growth, however, depend on the sectoral distribution of these FDI inflows. It is found that FDI had negative effects on economic growth in Argentina during the privatisation era because the majority of the FDI inflows were participating in the privatisation of the primary sector; mainly the petroleum sector. In Egypt, on the other hand, FDI had positive, yet limited, effects on economic growth during the privatisation era as the majority of the FDI inflows were directed to the manufacturing sector. A paper entitled "The effects of privatisation and FDI on economic growth in Argentina", based on parts of this thesis, has been accepted for future publication in the Journal of International Trade and Economic Development. This thesis was submitted before hard copies were available.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:573496 |
| Date | January 2011 |
| Creators | Naguib, Rania Ihab Fathi |
| Publisher | University of the West of England, Bristol |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
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