Legal Aspects Of Privatization With Special Reference To The Sudan

Abstract

The thesis is conducted on the international experiment in the transfer of the state-owned enterprises to the private sector (privatization), concentrating on the legal aspects of the process. The Sudanese experiment has been assessed in comparison with the international models. To illustrate the international experience, the researcher has exploited a considerable number of the relevant international legal references of privatization and the publications of the World Bank. Locally, the researcher has relied upon the information presented to him by the Ministry of Finance and National Economy, the Department of Legal Affairs of the Central Bank of Sudan, and the annual reports of the two committees concerned with the privatization operations in the Sudan, precisely the Higher and Technical Committees for Disposition of Public Enterprises. The two Committees presented a large number of the significant privatization contracts to the researcher. Furthermore, a considerable number of the privatized enterprises personnel have been interviewed. In the light of the international experiment, any government interested to implement a privatization program should prepare a privatization strategy which determines the economic objectives of the program as well as the legal formulas of the privatization contracts. The privatization strategy should also determine and ultimately abolish the valid legislations which may hinder the program. For example, a legislation which grants a monopolistic situation for the enterprise to be privatized should be abolished, for instance; whereas any legislation which encourages competition has to be activated and encouraged. Among the significant results of the study is the detection of the widening of the concept of privatization to include other types of privatization manifested in lease and management contracts, beside the sales contracts to which it used to be confined. There is also an international tendency towards the adoption of the contracts which avoid the state the full transfer of the state-owned enterprises. The Sudanese government, for instance, has extensively activated sale contracts which has restricted the opportunities for further future control over the privatized enterprises. The execution of privatization program may clash with the constitutional articles which restrict the transfer of state-owned enterprises to private sector. This is obviously prevalent in the countries of communist/socialist history prior to economic liberalization. These xiii articles should be amended before the commencement of any privatization operation as this may lead to legal obstacles which may ultimately eradicate the program. Concerning the institutional framework of privatization, some governments have assigned the execution of the program to the administrative personnel of the enterprises to be privatized, while others preferred to delegate neutral committees for the supervision of the proceedings. The Sudanese government has adopted the latter choice to guarantee neutrality and transparency of action. Some countries relied upon the existing public sector management legislations in administering the privatization programs, whereas others enacted detached legislations for the execution of the programs. The study has, however, recommended the use of the public sector management legislations if they clearly decide the right to take decisions with respect to the enterprise to be privatized. In the case of absence of legislation or ambiguity, the government has to enact detached legislation to organize and supervise the activities. According to the study results, the Sudanese government has succeeded in the enactment of a detached legislation to organize the process of the privatization. Due to the typical big size of the infrastructure sectors, governments all over the world have adopted the “Unbundling” technique which means the division of the sector to be privatized into smaller segments so as to facilitate the contribution of the private sector by lowering the costs. On the other hand, it enables the government to control the sectors maintaining the ownership of the strategic segments in particular. The Sudanese government used this technique in many privatization operations. Privatization activities usually lead to loss of employment. Therefore, in countries where social security nets are weak, or due to failure to secure the funds necessitated by the compensational procedure, the research recommends the method of “Generous Severance Payment”. This method has been adopted by many countries because it secures the financing required and evades the problems created by the delay of monthly payments of pensions. Use can be made of proceeds of privatization. Because of the practicability of this method, the World Bank has contributed to the financing of this method in many countries across the world. Due to some crisis between the Sudanese government and the international community, the Sudanese government has not benefited from these facilities.