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Showing posts from July, 2014

The Problem with Aid

The aid establishment has grown on the basis of 2 assumptions
1. That there is a capital shortage in poor countries and
2.  That these countries lack the ability to make policy either because of knowledge or information shortfalls.

The world has changed and these 2 assumptions are now untenable. Capital markets are flush with cash and they are eager to push it on to poor countries. The internet and globalization has made knowledge easily accessible to all. Most countries now have all manner of expertise. They are all exporting experts to the west.

Despite these developments aid continues to grow. Financial flows are small. Now aid establishment is retailing policy advice, capacity building and technical assistance.

While reports and consultants are surrounding poor country policymakers making them feel good, talent from those countries is being released to do outstanding work in the west. Yet their governments would rather have aid than bring back talent. And aid seems to be set to f…

Privatization or Fire Sale (with Shahid Katdar)

With Shahid Kardar

Happy days have returned. The privatisation process has been resumed in earnest. So goes Islamabad’s self-congratulatory declaration on the Rs38 billion raised from the sale of its 20 per cent stake in UBL. The authors of this article, who probably have been the strongest proponents of the free market in recent decades and have generally pushed for a more market-based open economy, should then be equally happy. We, however, feel that privatisation, done wrongly, can have perverse results. To this end, we refer to this deal to illustrate the several questions that should be widely debated so as to inform the government’s privatisation policy.

As mentioned above, we have long advocated the adoption of a more deregulated, open, market-based economy. Privatisation is but one step in that direction.

Most public policy analysts would agree with the following principles of privatisation:
a) The divestment should improve the efficiency and profitability of the operations o…