3 - PRIVATIZATION AND ITS IMPLEMENTATION IN DEVELOPING COUNTRIES

4 - INFORMATION AND PRIVATIZATION IN LDCs

There is little question nowadays that our society is entering an information age. The increase of information generation and dissemination has pervaded all aspects of our lives from personal needs to governing policies. Reports in this context reveal that there has been a considerable increase in the work force engaged in information related activities for approximately 17% in 1950 to almost 60% in the current time (1).

Special reports also demonstrate that World War Two marks the starting point for information to occupy a leading position in a massive governmental and private research development efforts. A huge amount of scientific and technical literature was created. "There has been more information published since 1965 than during all of history prior to that time"(2). This blooming of a sudden and unusual rate of information flow imposed the updating of professional and technical systems of data management. New concepts and techniques of information control started to develop in the late 1940s and early 1950s. The rising of new technologies during the 1960s and 1970s has deeply altered the way on which information needed to be organized and processed. There has been a great shift from all traditional systems to very sophisticated procedures and technologies; from perforated cards to micro-chips, CD-ROM and fiber optics. This technical metamorphosis, however, was coupled with a new international commitment to improve the administrative and economic layers that information needed to cope with.

This is indeed, a very broad and oversimplified image of information as a newly emerged protagonist in our contemporary era. Complexity of this phenomenon starts pointing out when we try to analyze on deeper levels the evolution of this conception throughout the different socio-economic contexts. Two major interrogations at that moment are to be dealt with : has this information spur been based on an equity principle among the international community ? Has it been faced with the same means and predispositions ?

This great amplitude of information dissemination started in a period when the boundaries of the two world economic blocs were in their utmost blinking; North and South; industrialized countries and newly independent ones. Consequently, being conditioned by the rule of adaptation under specific socio-economic criteria, the Scientific and Technical Information (STI) progressed under two big different trends; one relevant to the actual developed countries (DCs) and the other reflected by the current situation in developing nations or Less Developed Countries (LDCs).

By the present time, the core of international STI is located under the auspices of the DCs with the USA in a leading position. The LDCs, despite having significant resources of STI, lie on the periphery of the world scientific and technological system. They are still in the situation where their role consists of providing a large range of raw information material, which they recuperate in a processed state with a charged added value.

Without intending to extend this overview on economic details, (this will be done within further sections of this document) this iniquity has been endorsed throughout the last decades by a set of stimulants which implication is still slowing the socio-economic progress of the LDCs.

From the late first half of this century, LDCs started emerging from the colonial dominance during which their human and material resources have been consecrated to strengthen and comply with the metropolis economic requirements. Once launched in the post-colonial phase, they were badly in need for basic infrastructure which they were forced to get from the ex-metropolis. The need for this huge necessities imposed the interference of local governments to provide hard currency in order to purchase infrastructure and disseminate social goods on basis of national economic plans, international cooperation, economic subsidy, protectionism...Together with international organizations, they promoted the basic roots for a larger economic assistance and technological transfer.

This development policy, initiated to drain newly independent countries into the circuit of economic recovery and social welfare has been maintained as a prevalent situation. Nowadays, we frequently come across concepts such as Economic Assistance, International Capital Flow, Technological Transfer, Transborder Data-flow...in which national governments has longly operated as the only representative of the local forces. In fact, during the decades that followed World War II, policy makers in LDCs invested in the public sector with many ambitious objectives. VAN DE WALLE quotes that "Thousands of PEs were created in the developing countries between mid-1960s and the early 1980s. On average, they accounted for over a quarter of gross fixed capital formation in developing countries in early 1980s"(3)

But even though governments played for a long time this "paternalistic" role to provide social needs to their respective nations, the economic situation of the LDCs is reported to be under all expectations of progress. DEADHAR summarizes that situation in the following terms : "large unskilled manpower within a high rate of unemployment; unfavorable balance of trade; shortage of investible funds; high costs of capital and equipment; weak transport and communication systems; wasting of natural resources; defense forces backed by conventional armament" (4).

We can append to this list of features, total economic dependency on agriculture and weak educational infrastructure.

It seemed henceforth imperative that on basis of this prevailing situation, LDCs should have taken into consideration new economic parameters and contributors to formulate precise national development policies "in order to define goals, allocate responsibilities between organizations, obtain the largest funds possible, identify priorities for use of funds and secure the necessary manpower and equipment for execution of priorities"(5).

Economic and development theories have been meanwhile largely generated to depict this ongoing situation and to propose alternatives for economic recovery. From the 1980s, a widespread attempt by policy makers has been however registered to curtail the governments economic role. That was the starting of a new economic activity identified as the divestiture plans or privatization of public enterprises. This phenomenon started in Great Britain and gained prominence under leadership of Margaret Thatcher's government. Within the framework of international cooperation and supported by the international donor community, this new economic conception was "exported" and sometimes imposed to many LDCs. International Monetary Fund for instance, has systematically inserted the reform of public enterprises in its stabilization plans "proposed" to LDCs to cut down public expenditure. Some socialist oriented countries like China, Algeria, Tanzania have favored this policy in face of the ongoing world economic crisis.

By the end of the 1980s, privatization became already a commonly used economic issue for large number of national economic policies.

However, as part of this document will cover later, the scope and efficiency of planing and implementing privatization have been shaped on a large range of models and variations. Although it has been spurred so widely (especially in DCs), privatization is unlikely to result in significant gains if it is not seen as an instrument of competition policy to be accompanied by other measures which promote efficient market, define the correct order of implementation and fix priorities.

Within this wave of public enterprise divestiture in several LDCs, substantial conversions have not yet occurred. Those privatized activities have tended to be small in terms of outputs and employment. Priorities have been fixed on essential economic trends with short term implications on the adjustment plans. HEALD remarks in this sense : "A list of unanswered questions remain about future relationship between hybrids and governments, the cost and benefits of the regulatory system which will replace public ownership, and the balance between public policy and private interest. Can the market succeed where the state has been judged to have failed"(6).

The main objective of this document is to shed light on a specific field of interest still underestimated in many national development policies : information products and services in the wave of privatization that shakes the actual socio economic milieu in LDCs.

Before dealing with any aspect of LDCs experience in this field, it results of high importance to expand the basic concepts that actually characterize the free market activity on an international scale.

As defined in the previous chapter, developing countries are still in the phase where their role as value and norm receptionists hides almost all their attempts as generators of the same. They are consequently forced to follow the dictations of a world wide trade principles and policies. Their attempt to privatize information resources and services will certainly be an "inspiration", if not a duplication, from former experiences carried out in developed countries. Some examples in this context will be exposed all along this document.

Initially it was hardly perceived that information could be considered as a consumable good like any other market product, then submitted to competition between public and private entrepreneurs and organizations. The economics of information is indeed a comparatively new topic of interest. Like most raw resources, information is nowadays considered as a tradable commodity that needs to be processed, refined or packaged. To achieve the final stage of procession and ultimate distribution, financial commitments and investments has been largely forwarded. On basis of this market concept, the private sector shed light on information products as a potential resource of benefits. CORNIN reports : "The increasing commercialization of information and the rapid development of the information industry have highlighted tensions and conflicts between public sector and private organizations involved in the provision of information services" (7).

If we start from this predefined aspect of information as a commodity, we are bound to apply to it the four basic economic principles of cost, price, value and benefit which characterize both public and private activities.

Cost : The information cost as defined by BURK is "the costs incurred in acquiring and/or producing information, as well as storing and maintaining it, using it, communicating it and disposing of it. "(8). When a raw product is converted into a finished item, all resources that contributed to ad value to it have appropriate costs included in the real cost of production of that item. Cost considerations are actually getting higher impact in pricing policies due to the changed pattern of production, distribution and charging for goods, emerging from the application of new technologies. This stick relation between cost and price is also demonstrated to differ from one specific economic policy to another; for instance from an economy of scale where the cost of a single supplier production is below that of multiple production to an economy of scope where lower costs of production are achieved through jointly produced items.

In a report presented at the ASI annual meeting, ZAIS classifies cost strategy in several key cost concepts. He defines FIXED COSTS as constant or unchanged operating costs that do not vary with the number of profiles output by the producer. VARIABLE COSTS are those "outlays that are proportional to, or vary with the amount of business done or the volume of goods produced"(9). Variable and fixed costs are the TOTAL COST. "AVERAGE COST pricing include average fixed cost, average variable cost and average (total) cost". MARGINAL COST is defined as the addition to total cost of Q profile from the aggregate cost of Q+1 profiles.

Price : [Prices are] "attached to an information product, service, system or source, either produced in house or acquired externally, at the time of sale, based in part on costs for acquiring the raw materials (the data itself and the resources involved in their production and handling) and in part of the value added services undertaken at intermediate processing stages, or the transfer force attached by one internal organizational unit for sale an information product or service to another"(8).

In microeconomics theory's classical model, pricing objectives have been assumed to be profit maximization. Actually, businesses pursue new goals which are partly non monetary such as attaining a particular level of sales and services, achieving a certain share of the market, fully utilize existing resources, stocks liquidation for innovative purposes...In consequence, a new pricing principle has been introduced : cost recovery.

An interrogation evoked upon the nature of information goods and services quotes that since information has been located among the utilities which most economists agree to identify as "the pure public goods", no direct pricing either possible or desirable should normally be applied. However, many information products are supposed to have the potential for "exclusion" and therefore should be charged for. Exclusion is explained by FLOWERDEW (10) as the payment of a price for a service from which other consumers are excluded. For instance, in case of cable television, accessibility is based on subscription payment afforded to individuals instead of a geographic area.

In a market system, these prices act both as an incentive to maintain high or low production and as an inducement to ration the use of scarce resources. With this growing opinion that information services should pay for themselves, pricing objectives that include recovery of operating costs or total costs are increasing. ZAIS quotes in the same report : "these pricing practices do not necessarily have to be cost-oriented...Prices can also be based on the demand for a product or on the activities of a competitor"(9).

"The value is attributed to information produced or acquired by organizations, entities and persons, and delivered in the form of an information product or service...Perhaps the most straightforward criterion of information value is the willingness to pay for information. However, willingness to pay doesn't necessarily mean one places no value on the information sought"(8).

FLOWERDEW also argues in this sense that "information is difficult to evaluate" (10). His argument is that information is a derived demand used to produce another good. Then it often results difficult for the consumer to identify his real needs, the quality and quantity of this needed information and mainly how much will cost him having that information at hand reach. The real value of information according to this approach is then delimited after being involved in the creation of the subsidiary need it has been purchased for. This definition (social value of information) eliminates all aspects of financial value dictated by the information market system.

From an opposite standpoint, the value of information in a government centralized information system is supposed to be a selective choice imposed to the consumer according to socio economic and political orientations. This affects the genuine value of the absolute information on which a consumer has to operate a free and deliberate selection within a private market provision. According to PECK and RICHELS (11), the value of information is calculated as a function of information accuracy. That is information value could be measured only if it leads to actions that differ from the actions that would be taken without the information. They add that this evaluation should be extended to distinguish between public perceptions and expert judgments which frequently could be totally different.

Benefit : The measurement of benefits is usually far more difficult in money terms. Using the words of BURK, it "is the long term gain or ultimate purpose to be derived from the production/acquisition and use of an information product or service"(8). On a larger scope, benefit is the expected return of any investment. The benefit or profit is the result of the relationship observed between cost and price in producing and selling a product. In information economics, this term remains however in a back and forth between private profit making and public service ethics. The former is first and foremost concerned with the economic viability of its product range that guarantee the utmost profitability. The latter considers that if profitability should be maintained, it should be regulated in function of quality, cost and prices of products and financial capabilities of the consumer.

With these definitions in mind, and in order to provide the basis for critical assessment of the complex relationship that opposes public provision to private services, we concentrate in the rest of this section on a theoretical exposure of some of the special attributes of these two extremes. An empirical exposition of the different ways in which they can be organized and the manner how they interact will be undertaken in the next section.

In information economics, there has been in fact much dispute and controversies over the boundaries limiting private and public sectors contribution to services and goods provision through corporations, private firms and government agencies respectively.

Any economic development process nowadays reflects the use of both of these major economic principles which existence varies from a society to another; from so-called free enterprise or capitalistic society to so-called command economies or socialist societies. In economic terminology, these are Government Administration (or public service) where goods and services are supplied in accordance with what governments regard as the social good, and The Economic Market (or private sector) in which a variety of enterprises act under the prospect of private profit making.

We define public sector as any activity where goods or services are available to the broad citizen (publicly or privately) in the absence of restrictions on use including absence of a fee. For this class of economic activity government subsidy and tax financed creation and distribution of products is essential. This theory has been developed according to the following set of economic principles which reflect a better government control over public goods and services than any private institution :

2. 1. 1 Natural monopoly : It is said that a natural monopoly exists where least cost provision, given the size of the market, requires only one supplier. In such a situation, with the absence of competition, the suppliers gain a potential market power. In these circumstances, the role of the government is to cut down this undesired power through other policy alternatives such as regulations, franchising. This has led more economists to argue that all "merit goods" (Health, Education, Housing, Security.) should be nationalized or publicly regulated to limit the undesirable use of such a power.

2. 1. 2 Externalities : Externalities are defined as costs and benefits for people not directly involved in any commercial process. An example in information field could be for instance the choice for a high potential TV network design primarily oriented to broadcast local TV channels but which use can allow capture of larger number of foreign channels. This is a kind of positive externalities which no extra-costs of the choice are expected to be paid for. A negative externality to the same example could be an overlapping of channel frequencies which will prevent users receiving local channels to which the network has been initially designed.

Economists used to demonstrate that the absence of government subsidy to encourage positive externalities and taxes imposition to prevent negative externalities usually leads to an over-production of these ultimates.

2. 1. 3 Exclusion : Exclusion as referred to before is the fact to exclude an individual or a group of individuals from using a public good by imposing charges for use. Some goods and services are however considered by economists as "pure public goods" such as national defense, street lightening, radio broadcasting...have to be provided to a group as a whole entity without any particular exclusion. The private market would then not find it profitable to supply "pure public goods". Then the responsibility of the government is inevitable.

2. 1. 4 Merit goods : These are by comparison with "pure public goods" those goods and services that society considers vital for the community. Health, education, housing, security...are often thought of as "merit goods". They are so essential that no profit could be made through their provision. The government in such a case can either provide them free or finance or subsidize provision by private market.

In information industry the big question remains to determine the appropriate scope for government action in providing information products and controlling its public dissemination. First, it is well known that almost all the business of governments is related with information processing. Many organizations (banks, local authorities, private companies...) have to make periodic returns to government. The extent to which the government is prepared (technically, financially, politically, ideologically...) to process this information and handle it out as a public good, influences the environment in which it is used. Second, as an information generator, government also possesses huge repositories of data (reports and series of official statistics) many of which are accessible to the public.

This orientation towards an exclusive government monopoly over information services and products is defended on basis of the following assumptions :

An ethical consideration is that reported by Martha Williams when she quotes : "government has provided much of the support for research and development in information science and technology without which the on-line community would surely not have developed its present state"(12).

This section addresses the opposite version to government "incursion" in information provision. As stated by many supporters to this private alternative, the private sector has a number of advantages that supersede the government role as a disseminator of information products. The first reproach of private sector on the government role is that it can not be taken for granted that government in the real world will be willing or able to put things right. The argumentation used is that public agencies may be more responsive to political pressure than to consumer preferences. The provision of information in this situation will be conditioned by what the government regards as necessary for the citizen and not what this latter would consider as necessary for his needs.

A second argument to this theory is explained by the fact that capitalistic society is predicated on the belief that competition is the best means to guarantee the necessary range and quality of services and products. The spirit of entrepreneurship is well prepared to take risk with venture capital funding to create a product and try it in the market place. Existing firms are under continual market pressure to maintain low costs, products quality, innovation policy...Competition, in consequence, forces entrepreneurs to meet consumers preferences, needs and requirements. Using the terms of Marta Williams to set up this announced supremacy of private sector, : "the public sector is stable and slow to change while the private sector is dynamic and quick to change. The public sector is non-innovative, the private sector innovative. The public sector is run by a cumbersome administration, while administration in the private sector is efficient and focused. The public sector tends to make its products and services comprehensive or available to all, while the private sector is self regulated. When the public sector rations goods or services, they are rationed to the "have-nots", whereas the private sector rations goods and services to the "haves". The public sector provides for little or no choice, the private sector allows free choice. The private sector tends to support a free market economy while the public sector tends towards a controlled economy"(12)

The question however is not whether a for-profit firm could sustain an information product with a total exclusion of governmental partnership, but rather how the private sector could break down a "historically legitimate" government monopoly and get through the barriers that prevented its implication in information industry.

To answer this interrogation, we can forward some definitions to some economic activities nowadays commonly applied for between both poles : private and public sectors.

The private provision first is taken to mean the production or provision or delivery of goods and services by the private sector on one or more ways. ROTH defines the role of private suppliers on the following principles (13) :

2. 2. 1 Contracts from public agencies where one government agency could contract out some of its activities to a private firm ( such as roads, telephone wires...) In Brazil, Zaire, Tunisia...for instance, road maintenance, telephone wiring are confide to private enterprises.

2. 2. 2 Monopoly franchise is the situation when a private company (or more) could be appointed by public authority to provide services on a monopoly basis at specific standards and tariffs. In Cote d'Ivoire, for example, water provision is assigned by government, under variable contracts periodicity to private companies.

2. 2. 3 Management contracts are cases when public agencies retain responsibility for a specific service but arrange to private management. The Botswana telephone service is for instance a State owned company which is managed by Cable and Wireless PLC.

2. 2. 4 Vouchers, typically in the USA, are situations where goods or services are obtained free or at reduced prices without loosing the power to choose between competing suppliers. Subsidized items for poor people, for instance, purchased in private shops without the government having to open special low price food shops is an example.

2. 2. 5 Consumers cooperatives are self governing, voluntary organizations which distribute surpluses in proportion to the members' purchases by opposition to shareholders' companies which members are assigned surpluses in proportion to the share they own.

Hitherto, we just come to see extreme situations where two economic principles are more theoretically opposed than the real world where they are performed. It is true that the economic market has been submitted since the dawn of the modern era to the main control of government instances and regulations. But with the overcoming of the capitalistic doctrine, the private activity (with total disregard to oligarchies and feudal systems) has been gradually adopted as a counterpart to the government monopoly. This historic primacy of government is actually encountered in certain countries totally over-passed by the private sector. But in any of these cases neither private nor public activity has been totally eradicated on the behalf of the other. Both are in a continuous cohabitation with unstable parallelism from one case to another. The question, if it is to be raised is to determine whether this cohabitation is dictated by a completion of one to another means and goals or rather through an equilibrium of competition power within the same economic system. In other words, how to determine if a shift from and to private or public sector will result in a more efficient handling of responsibilities.

To place this discussion in context, the following section briefly surveys the role of the public service and its relevance as a key motivation for privatization initiatives. An empirical assessment of a broad and deep economic impact of the privatization is beyond the scope of this document although some hints of this impact will be touched while dealing with the current situation in LDCs.

The process of privatizing state owned corporations initiated in the late 1970s, was in reality a result to a common belief that there were significant benefits to be gained by eliminating certain inefficiencies fostered by public ownership. CHRISTIANSEN argues that : "In reality, although efficient operation of these entities [state entities and parastatals] was a legitimate concern, often the more pressing motive for privatization was the fiscal drain on government treasuries at a time when policy makers were worried about inflation and public sector deficits"(14).

VAN DE WALLE backed this position when he qualifies public enterprises with unsatisfactory performance. His argumentation is that given the protection that public enterprises receive against domestic and foreign competition and considering the privileges of government subsidies and easy access to capitals, they are normally money losers or do not make as much money as they normally should (3). Political interference in public enterprise operation, lack of responsibility invested in civil servants, lack of stimulation and motivation for better productivity in public financial market also strengthened the draw-back of PEs supremacy. Backed by government subsidy and support, "Public enterprises can incur losses but cannot go bankrupt"(15). This always results in a week market competition supposed to play a decisive role as an incentive towards productive efficiency and quality improvement.

However, faced with an increase in deficits, governments are becoming less tolerant of financial losses and economic inefficiencies. There was then a great move towards privatization endorsed by an ideological climate that is turning against the public sector. But as demonstrated by the large literature depicting all aspects of these experiences, privatization by itself, arbitrarily imposed to divest government ownership without any logic analysis of the market structure is unlikely to lead to any major gain. HELLER and SCHRILLER claim that : "such gains can only be realized if privatization is seen as an integral element of a structural adjustment reform effort involving trade liberalization, relaxation of price controls, corporate tax simplification, reduced interference in public and private enterprise operational decisions and increased exposure to foreign investment and trade"(15)

Privatization may even conduct to losses in efficiency. In a number of cases, when governments are under strong motivation for privatization, they restrict the competitive environment of the public enterprise so as to promote the potential value of the private sector. In case of some enterprises, there has been a temptation to maximize the fiscal gains by restrictions on trade or by granting them a preferential position in domestic market. The repercussions were a loss in efficiency which was reflected by reduced outputs and decrease of revenues to the budget. In such situation, public production and ownership may result in better market management.

In this context, economists have established a conventional means to analyze the efficiency of both alternatives : MARKET FAILURE and GOVERNMENT FAILURE. A market failure is interpreted to be either a higher cost and higher price or a lower cost and lower quality in a production process or a combination of both. The appropriate remedy in this situation is agreed upon to be a government intervention through regulations, taxation, subsidized production by private contractors. Such regulations taken in a different context could result however in trade-offs between provision objectives, such as limitations in monopoly exploitation, and qualitative objectives that result in lowering of monopolists' incentives to reduce costs and improve out-puts. Tax evasion in this situation becomes common and government remains unable to ascertain the true profit situation. In sum, this possibility of GOVERNMENT FAILURE should also be taken into consideration when a government remedy to a market failure is to be considered.

In case of information market place, many of the attributes of information and its transmission, some of which we described in the previous chapters, demonstrate that it should be a free public or subsidized private provision. But as WILSON quotes : "the principle of free access is a noble one and easily followed so long as you can attract extra- resources. But if you are working on a dwindling budget and the choice is between free access to increasingly mediocre and unsatisfactory services, or unrestricted access by payment to the whole spectrum of information and cultural resources demanded by modern citizens, then you begin to qualify the word "free""(16).

What is commonly predicted is that all capitalistic societies will continue pending on both services (private and public) and the role of the national forces and institutions is to decide where and when the limits should be highlighted between both economic structures. KEYNES quotes in this context : "the important thing for government is not to do things which individuals are doing already and to do them a little better or a little worse; but to do those things which are not done at all"(17).

CHRISTIANSEN answers :

"Although privatization can be an attractive alternative to public sector enterprises, it is frequently neither the only nor the best alternative"(14).

Given the seriousness and the complexity of the problem, the implementation of these economic policies and their way of interaction and connectivity has been much more controversial in LDCs due to many factors I will try to highlight in the next chapter.

Obviously, a single chapter cannot address or synthesize all the issues surrounding privatization in LDCs, and must therefore be selective about the topics to be covered. If we opt for a general analysis of this issue, we can start saying that LDCs have been involved in this economic process on two big ways.

First, as we said in the beginning of this document, LDCs often have the tendency to calc or adopt the policies experimented and carried out in DCs. Considering the historic economic dependency that has always characterized the relationship between both poles, some LDCs sought to follow independently the example of DCs implementing economic private activities.

Second, many of them are still much reliable in their economic growth on substantial financial assistance from DCs. They were consequently pressed to implement privatization policies through the conditions attached to structural and sectoral adjustment loans made by the donors community. "Because foreign aid generally gives the donor substantial influence over the recipient, aid interdependence is inherently asymmetric"(18).

In both cases however, whatever the endeavor and the planning to implement this economic reform are, the typical LDCs context still reflects common features and peculiarities. "In most developing countries the economic distinction between public and private is blurred and the extent of regulatory failure is little correlated with patterns of ownership"(3).

At this level I would rather embrace the economic background and implications of privatization in LDCs which has been largely debated in several works, and try to concentrate on special issues with sociological perspectives. For economic considerations, I would rather recommend the works of VAN DE WALLE(3) and KHAN(19).

It has been largely assumed that the implementation of privatization in LDCs has been the result of economic deterioration and a loss of government control over the provision of public services and goods. Privatization however, was not in many cases the appropriate remedy. The case of LDCs indeed, offers a set of economic peculiarities which has largely conditioned all economic reforms and policies. Some of these considerations could be resumed in the following assumptions :

3. 2. 1 Financial assumption : The international financial market is evidently an orbit where some DCs currencies are influencing the way how domestic currencies of LDCs act on local economies. This up-down relationship is translated in the economic terms of "Exchange rates", "inflation", "Devaluation"...In many LDCs where financial systems have longly been an exclusive government responsibility, the impact of the current world economic crisis has resulted in strongly negative consequences for development. Confronted with persistent balance of payments problems, some LDCs have resorted to devaluate their domestic currency as a policy of adjustment. The immediate consequences of devaluation as a new form of economic indexation have been that it increased unemployment, tended to induce stagflation (20) and increased the level of foreign prices measured in domestic emergency terms.

This policy resulted in shortages in domestic funds for public expenditure and foreign currency to pay for imported goods and services.

Finance is then encountered to be not only scarce but also unreliable. This dependency on international finance mobility has induced many LDCs governments to sweep reductions in their budgets allocations. The example of OPEC is very relevant to this situation where national economies, based on oil incomes, has been deeply affected by the collapsing of the international market prices.

3. 2. 2 Efficiency gains : "Grand claims were made on the basis of ideology and conjecture that privatization could greatly enhance overall economic efficiency and thus have a strong impact on national output"(3). In LDCs however, the objective of realizing more efficient allocation of resources and faster growth rates has sometimes resulted in considerable distortions between prices and marginal costs essentially due to price controls, imperfect competition, taxes, subsidies and trade restrictions.

3. 2. 3 Savings and investments : "The rate at which an economy's capacity can be expanded depends among other things on the split between consumption and investment, as well as on the nature and quality of the capital stock being added"(21).

For many LDCs policy makers, divestiture of public enterprises to the private sector was the major remedy to cut government expenditure and help restore budgetary balance. This fiscal justification is generally accepted although it is predicted that in the immediate future, these savings in government expenditure will serve reducing the burden of foreign debts. Real financial savings are therefore expected to grow less rapidly than the real economy.

There still exist however several obstacles to overcome in order to provide the private investments with a favorable environment to make considerable savings. According to KHAN (19), governments still maintain unrealistic exchange rates, high rates of taxation on private activity preventing private investors acquiring domestic security denominated in foreign currency. The ambivalence between public policy aims to improve the fiscal position and the focus of private saving on interests rate policies caused a large reduction in private saving and frequent outflows of capital to more favorable markets. Foreign investment (generally through multinational corporations) represent roughly between 15 to 20 per cent of the capital flowing in the LDCs(18). As McDonald reports, a country can and should borrow abroad as long as the capital produces a return to cover the cost of the borrowing (22).

3. 2. 4 Competition : Competition is supposed to be the master key to any private activity. For an enterprise that is essentially not competitive under free market conditions, privatization will not remedy the situation. In LDCs several factors are weakening the competitive market principles :

3. 2. 5 Trade : One of the inefficiencies that accompanied certain attempts of privatization in LDCs is caused by some artificial barriers to foreign trade. KHAN reports that "tariffs, quotas and other restrictions on trade and payments reduce the amount of the trade and specialization and tend to foster import-substituting industries that lack efficiency and flexibility of firms continuously exposed to international competition"(19). LDCs experience shows that privatization attempts has generally been associated with tightened controls and protectionism from international competition. There has been constant rejection to multinational corporations and fear that they may retain a large measure of decision- making control over their assets; concessionary foreign aid and financial capital flow.

After World War II and with the beginning of the post-colonial period, LDCs governments guided all aspects of socio economic recovery. This leadership strengthened the image of the governments as tutors for vital requirements. Even though public opinion is gradually moving against the public sector in terms of economic efficiency, privatization is still in need for socio-political reinforcement.

3. 3. 1 Political constraints : Privatization in its broad meaning includes exclusion. This supposes that it has restrictive distributional consequences when it favors certain groups and exclude others. These groups could be considered from either economic or political standpoints (payers or policy makers). The political constraints of privatization could be resumed as following :

3. 3. 2 Social constraints : The social constraints to privatization are commonly determined to turn around the two major concepts of Distributional impact and Labor impact.

3. 3. 2. 1 Distributional impact : Some of the critics of privatization have used the argumentation of exclusion to demonstrate that the non privileged class of the population will be prevented the benefits of privatization. In LDCs, this social class represents the largest proportion of the population. Almost all the merit goods are government subsidized, then afforded for free or at reduced prices. Any attempt to privatize any of these basic commodities will be faced with a straight rejection notably if cross-subsidization practices are abandoned.

In 1983, in Tunisia and Morocco, the cut back of government subsidy to wheat products resulted in a slight increase of pastes prices. Population in both countries went on dramatic manifestations to maintain initial prices. Some argumentation however demonstrates that privatization may positively affect the poor if the goods and services provided by the public services become less accessible to them. It is demonstrated in this sense that in many LDCs, public services reflect an urban bias and inadequately serve rural populations where there may be large pockets of poverty(24).

It is controversially said also that the consumer in LDCs is increasingly attaching a higher value to the quantity and quality and other characteristics of the goods and services produced. Then he would be prepared to pay higher prices. This presumption however could be faced by two anti-versions. First, when we deal with the willingness of the consumer to pay for any kind of services or goods, other parameters are immediately involved : the personal revenue and the priority given to the service or good produced are immediate stimuli on the consumer to be able and/or motivated to pay. This assumption leads us to consider first the social welfare and the GNP within which the individual is acting as a consumer. Privatization in a majority low income area will result in a hard adjustment policy between cost price and demand. Second, when privatization responds to major claim for better services and goods for higher prices, exclusion always exists. In LDCs, an empirical question, as yet unresolved, concerns whether policy makers have in fact created instruments to compensate the poor when the need arises.

3. 3. 2. 2 Labor impact : One of the major problems that characterizes LDCs economies and societies is the burden of a large range of unemployment. In many cases, governmental positions to cut down an increasing number of unemployed people has been the condensation in public services of predominantly unskilled manpower and administrative staff. In Tunisia for instance, a large range of unemployed qualified manpower has been absorbed in 1988 by a law stating half-time half-salary jobs in public sector. With the overcoming of privatization, rehabilitation of public enterprises has gone through a limitation of the labor force. In Brazil, only one of the 17 public enterprises which have been privatized in 1985 had more than 1000 employees. In Costa Rica 18 firms proposed for privatization employ less than 1% of the labor force(25). Beside the personnel restrictions, privatization has been also expected to lead to cutbacks in personnel costs. Public choice theory suggests that in such cases it is easier for collective actions to act against privatization than for it. In fact, in many LDCs, although privatization enjoyed an increasing ideological support among the technocratic elite, it has so far failed to mobilize popular support.

Yet we did not cover the core of our major concern : information resources and services in LDCs and the impact of privatization reforms on the promotion or restriction of their value within the national economic recovery plans. This issue will be however better performed if we anticipate a brief presentation to the role of information in LDCs and its current value as a socio-economic promoter. This will afford the basis for the "for" and "against" attitudes which we are presumably going through in the rest of this document.

The relevant question with which to start discussing this issue would be : if information effectively contributes to the development of LDCs, what basically will it rely upon to make society making profit of it ?

There is a general agreement that development is the achievement by means of a collective effort of an irreversible and balanced level of progress in two of the components of the national society : the universality of infrastructure and the fulfillment and enhancement of the self (Superstructure); in other terms technological and human backgrounds for development.

A common belief nowadays is that we are undergoing a series of revolutions one of which, identified by TOFFLER(26) and SURPRENANT(27) as "THE THIRD WAVE", is the electronic revolution; the first and the second being agricultural and industrial revolutions respectively. POLMAN(28) argues in the same context that the modern situation presents a fourth communication step after those of speech, writing and printing. Today there are more recent technological development in the information industry, from personal computers to communication networks, satellite and microwave systems, fiber optics, video display terminals, videotext, laser...

In LDCs, industrialization through technology transfer is becoming one of the main concerns sought after economic objectives. It is expected to "make available large amounts of energy at cheaper cost, more control over the circumstances of production and faster communication"(29). In order to make profit of this increasing technology, LDCs have been challenging the deep impact of the technological dependency to which they have been submitted. Although CHITTY(30) argues that LDCs could "leap-frog" the industrial age to the electronic age by means of the application of these new technologies, some might argue that the rate at which the technology revolution is progressing makes it fairly meaningless to them. The hypothesis behind this standpoint is related to the crippling industrial situation in LDCs.

It is may be inevitable to admit that the repercussions of the world wide spread phenomenon of Information Technology (IT) might have affected certain policy makers to opt for this alternative; but it is always less ascertained that this motivation could have resulted in any high estimated consequences scientifically-based instead of emotionally desired to LDCs. I mean by "scientifically-based" long-term efficiency, coverage exhaustivity of information policies, a minimum of rationale in sharing decision making. Technically, there are almost no unresolved problems that may prevent LDCs to acquire information technology. Direct purchase, international assistance...can provide a minimum of basic technology. What intrinsically needs to be worked out is the appropriate indigenous creativity that could be able to maintain, exploit and promote the use of this technology in behalf of development plans. Without parallel development of not only documentation stores but also the necessary skills in information service development and training, the simple availability of technical access is insufficient(31, 32). McCarthy(33) attributes the problems that the technology approach throws up to the following concepts :

I just complete this list by the concept of market monopoly and trade restriction on technology market place. In many of the LDCs, it is amazingly and contradictory referred to "protectionism" when trade liberation on technology market place is evoked. Protectionism is normally applied to protect national products from foreign competition. To whom is protection then guaranteed when the importation of technology devices, yet exclusively designed in DCs, is submitted to high rates of taxation? Personal computers which are presumed to be the nucleus and the basis for a broaden move towards information technology are badly submitted to foreign trade control and local monopoly franchise. In this strict point, I believe that privatization on basis of a free market concept would fasten the overspread of information technology. Competition will help improve quality and reduce prices for customers.

The concept of information as a societal oriented value is reported by SWEENEY as : "Information is the key to self determination within mutual dependency and mutual respect for the dignity and integrity of each culture. The information society will only be meaningful in closing the information gap if it is a society of equality in the flow of information" (34).

The key issue of information supply and demand as development basic requirements is also considered to be "vital to the proper function of a democratic society, a crucial tool in a productive economy and an effective government, a central part of the growth and well being of individuals"(35).

This perception is at a large extent very theoretical and "tinged" with a chimerical value when it is applied to the actual information society in LDCs. In fact, it must be seen that the actual state of the art of LDCs information activity owes a large part of its original starting to the principle of the Scientific and Technological Information transfer (STI) initiated vertically as a technical assistance for development. In building up the national information plans, a major emphasis has been given to the infrastructure considerations more than the stimulation of the individual need for it.

"Development, however, implies not only a societal process but also an intensely personal involvement" DOSA reports(36). Very limited progress about information as a technical assistance for development could then have been reached in LDCs where "governments, universities, and the productive sector [and the citizen] were and still are suspicious of each other"(37). According to OCHAI, a society is only prepared to take advantage of its information infrastructure after it should have passed through subsequent transformation from "information conscious" to "information literate" and ultimately to an "information society"(38). He also argues that many LDCs are still in the first stage of development process where agriculture "revolution" absorbs almost 70% of the labor force engaged in the economic sector.

So far, our consideration towards information put aside the end-user from any criticism although he drastically weighs on the final success or failure of any information policy. In LDCs, national information policies commonly disregard this element as a decisive parameter. That was and still is the main reason to explain the vacuum created around them. It is always referred to end-users as being value receptive whose contribution to choice making is taken over by government. Whoever the responsibility is does not import actually. The fact is that by identifying the information users in LDCs, it is possible to come out with a number of features which URDANETA(36) summarizes as :

I would rather append to this list three other elements which I consider as much important.

First, economic environment of the potential user of information resources in LDCs is rather restrictive. BOUAZZA reports that in LDCs, the average Gross National Product per capita is under 200 dollars(39). In many of the Asian and African countries, the income per capita is below 100 dollars(40). Thus, one of the major motivations to information seeking is missing.

Second, education and literacy in LDCs is absolutely far to be enviable. On basis of last UNESCO statistics(41), 105 million children between 6 and 8 years of age never went to school in 1985, 60% of which live in LDCs. 200 million others are supposed not to attend any school during 2000. According to the same statistics, around 900 million analphabets or illiterates exist in the world. The rate of illiteracy is of 54% in Africa, 36% in Asia and 17 in Latin America. The pressure of the economic crisis and the foreign debts gave LDCs no alternatives to cut back in social expenditures and mainly education budgets.

Third, a majority of LDCs societies are deeply rooted in oral communication systems. Individuals have inherited a scarce reliance on material support of information. A brief survey over statistics would show that radio and TV sets are on top list of media systems used among populations. Newspapers could be cheaper but they represent a special complexity of handling.

Consequently, in spite of the good intentions manifested, the language of information for development in LDCs is still in a position which do not make evident that information alone without the social support will industrialize the developing societies. I classify my perception to social requirements of the human kind on three main levels :

People in LDCs are still in the preliminary stage where the basic needs for subsistence are still the main concern. Information is expected to serve the social promotion when these instinctive requirements are fulfilled. Information in this precise context could be considered as a consequence and not a cause to development. At this level, privatizing information would have no other meaning but deepening restriction and limitation of information use. To pay for information, which is a secondary commodity for low income and preliterate population should be the result of an improvement and fulfillment of these basic prerequisites. The growth of free public information access and its impact on libraries and information services means that users place relatively low value on the receipt of information(42). I personally experienced that fact even in academic libraries. Once a "paid for" service of photocopy is imposed, students tended to reduce making reproduction and more incidents of book distortions have been reported.

Apparently, we may have progressed in our discussion to this issues a bit far from our major concern of privatization. But in reality that was an attempt to highlight the practical and realistic environment where such economic policy is to be applied.

No doubt that information flow is increasing more than the systems created to control it. But it is also becoming more expensive since the cost of its generation and dissemination are conscientiously added to its real or potential technological value. It is in other terms a new industrial commodity that LDCs are not yet commonly used to handle conveniently. To privatize or to maintain under government control such a commodity is dependent on the inter-relation of both issues we have discussed so far : technological background and social susceptibility and ability to react to it.

In the following chapters we will expose a deeper approach to the privatization effect on both of these considerations and try to make a consensus regarding their implication on the programs of general development for LDCs.

When we generally deal with information resources and services, we automatically scan a whole scenery where all kinds of traditional and sophisticated tools and gadgets are interacting and completing each other in providing information for all kinds of users. In DCs, "for the library and information profession, the electronic revolution is accentuating the approach of the information scientists more than that of the traditional librarian"(16). At the same time, according to TASHI and HAVARD-WILLIAM (43), the revolutionary changes in communication and computer technology are rapidly changing the ways in which people acquire information and communicate it, changes that augur a profound impact on libraries and other information centers. They classify this impact in three generations of data communication structures. In the first, users are directly dealing with libraries and information centers. The second generation represents the data base producers providing databases to vendors who commercialize information to users through libraries. In the third generation, users are in direct contact with database vendors without any interference of libraries.

I believe this has happened to some extent under impact of a well controlled information policy which was strongly backed by a broader structured economic strategy. If one takes this point of view, it would be equally possible to exploit the potential of privatization as an economic argument for disseminating community information and diversifying sources of scientific and technological data.

In LDCs however, on the threshold of the specific peculiarities of the information society which we discussed in previous chapters, we cannot help but admit that the current situation is still at level of the first of the three generations previously mentioned. Some experiences within the frame of the second generation (with the implication of telecommunications) are just in their first attempts. But they are exceptions and therefore cannot be considered as a common state. This implies that the main activity of information dissemination in LDCs is essentially, if not exclusively, relying upon libraries and information centers on one hand, and some very limited telecommunications techniques on the other hand.

Our concern now is to apprehend whether a privatization policy could open the way to improve the infra and superstructures by diversifying the information sources and strengthening their role in the development process.

The structure of library networks in almost all LDCs is known to be centralized systems headed by institutions named National Libraries. Directly subsequent to them are the regional public libraries which patronize a larger number of local public libraries. This is the broad concept of public library system when we first pinpoint the question of repartition. However, on the peripheries of this traditional architecture some school and academic libraries, private enterprises information centers are independently breaking through their way out of any information policy coverage. Related to this is the question of are public libraries and other publicly supported libraries part of government or do they belong to a third sector "not-for-profit"?(16). The prevailing situation nowadays is that of free access to information. Free access means of course free of charge. In this specific element of information availability and pricing reside very controversial discussions among government officials, information producers, academic institutions and public consumers. This controversy is conducted on political, economic and technological issues.

4. 2. 1. 1 Political constraints : There are "compelling" reasons to delineate restrictive political influence on libraries privatization in LDCs. Since libraries are the most frequented location for information seeking (charge free access), they become a political instrument throughout which LDCs political officials govern implicitly the mass political awareness. Because government is also an information generator, it prefers "to block off not just the opposition but the general public from information which it is inconvenient for them to have"(16). Privatization in this context will result in opening up government information for exploitation by the private sector. Privatization will also prevent government from using censorship to orient the public opinion towards precise political, ideological, ethical grounds. The question then is not whether a for profit firm could sustain or not an information product but rather where there is a legitimate government role and public need in creating and distributing particular information products.

4. 2. 1. 2 Economic constraints : Probably the most significant factor that seems favoring the private sector involvement in libraries and information services is the severe constraints imposed on library budgets. These constraints have longly militated against the development of new or enhanced services which always require additional capital funds. More than this, many LDCs are actually adopting new economic adjustment plans "recommended" by the funds donors community (International Monetary Fund, World Bank...). These recommendations are mainly oriented towards the fostering of the agricultural sector at the expenses of considerable stagnation and even cutbacks in social and cultural projects. Public expenditures in education, cultural matters are commonly targeted. In the very precise case of libraries and information centers "the dependence of developing countries on materials published overseas usually result in higher overhead costs per item. Consequently, libraries in such countries spend a disproportionate part of their total budget on books and serials"(39). Beside the fact that literature from abroad is expensive in relation to available funds, it must be paid in foreign currency which is almost always scarce. Backed by academic community, privatization of books trade is claimed to be freed from these economic pressures and put under free market economy which is presumed to update collections building, promote edition activity, reduce financial wastes on duplications of tasks. The public provision adepts remain reluctant to this alternative. They focus on the principle of free information for all.

4. 2. 1. 3 Technological constraints : Nowadays, an international rapidly growing mentality is changing the traditional collection-based approach of libraries and information services. The new phenomenon of Information Technology is orienting the information activity towards innovative approaches in data handling. This belief is basically reflected by the following assumptions :

In DCs, libraries realized that they can no longer pin on conventional justifications for maintaining their services. They were bound to compete for data processing and information sharing. In LDCs however, there is a well grounded fear that much of the new information, electronically and optically published through IT, will become inaccessible to them unless they make the appropriate technical advances to exploit it.

This preoccupation has been in reality translated in a massive purchase of IT inconsistently installed with the hope to afford the basic gateways to ensure the continuing flow of scientific and technical information (STI). But although IT (mainly information storage, retrieval and delivery technologies) may be viewed as above the average need of LDCs to access international databases, we can confirm that it still serves as an incentive to build local databases and design local area networks. However, in spite that the mechanical storage techniques are the most effective means for LDCs to achieve access to STI, some problems perceived by the technologists approach may block the maximization of profit from these acquisitions :

The question however is not how far the information technology transfer to LDCs has been effective, but which strategy to adopt in order to hasten this "down-loading" and reduce the trench that is getting wider vis-a-vis the DCs.

The key issue has been centralized on the economic responsibility to harmonize local economic ability and international technological availability so that a common profit could be realized.

Here lights have been shed once more on privatization as a probable alternative to the problem. Privatizing information resources however does not sound a convincing choice to certain government politicians. Privatization for them means opening the way to foreign investment; then to Multi-National Corporations (MNCs). From this standpoint it is becoming a mater of national security since the MNCs will have access even to government information. Another common fear is that the MNCs could impose economic policies contradictory to national interests. It becomes then a matter of economic protectionism against monopolistic dominance of the local market if not the local economy (46).

From another view-point, Information Technology is based on most of its part on sophisticated processing procedures like ON-LINE access to international databases, electronic mail systems, computer networks, satellite communication...This requires a parallel concern towards associated technologies which technical and social status may condition any economic reform on IT commercialization. Telephony and telecommunications networks are yet existing in LDCs although their technological and managerial status are not viable.

In almost all LDCs telephone networks are resultant from colonial periods. Very few innovations have been made to cope with the vertiginous changes that occur in DCs. MATTA and BOUTROS(47) studied this precise subject when they discussed the implementation conditions of electronic mail system in LDCs. The problems which they view to be related to telecommunications in LDCs are classified in three main categories :

These are in a sense technological considerations related to what any reform policy should focus on to solve the problem of technicality, compatibility of systems, maintenance of equipment, design of networks. But telecommunications environment in LDCs is still affected by sociological and economic disadvantages. In LDCs, telephones are still viewed as inessential and largely luxury items. Rural areas are generally not equipped with telephone wires. It has been and is still a concentration on large cities where administrative and commercial activities express the whole need for it. On a popular background the use of telephones is often the last means thought about to communicate. A popular opinion has created the connotation between telephones and emergency situations where the individual is forced to use rapid contact. Otherwise, life of a common citizen in any LDC is much less controlled by the time pressure. Then, to privatize or not to privatize remains the big question to deal with in this particular environment. As usual, there is the controversy between both public and private ownership. ROTH(13) treated this controversy in the field of telecommunications and presented a list of argumentation stating the characteristics of this duality.

4. 2. 2. 1 Public sector provision : The argumentation put forward by ROTH to delineate the role of the government in the telecommunications provision could be resumed as :

But, considering the economic environment that he goes describing, the telecommunications have been accorded low priorities in national budgets although many consumers are more and more willing to pay up front the full costs of installing the appropriate equipment. These are however a minority and low national income is one obvious explanation. This doesn't obstruct the private solution to be the alternative to promote this sector.

4. 2. 2. 2 Private provision : The private ownership is in fact backed with the following set of argumentation which are enumerated by ROTH as following :

He considers that "telecommunications development is indeed a highly capital-intensive and LDCs are full of under-utilized human resources, of potential managers, entrepreneurs seeking outlets for their energies. " These entrepreneurs need finance, equipment and technical training. These needs could be afforded by the private sector for instance, by means of the international corporations which are eager to broaden their economic scope.

The consensus between both mentioned extremities is delineated by ROTH as a mutual cooperation. "When private sector plays a significant part in the provision of telecommunication services, governments may need to play three important roles. " He defines these roles as :

We can conclude immediately, that telecommunications have emerged as another controversial element between government and private sector. Its increasing importance in the national development policies and the IT transfer programs are caused the major concern which is actually paid to its implementation. Its peculiarity is that while libraries and information services have been for a long time evaluated according to social and human considerations, telecommunications have been essentially a matter of equipment supply policy.

Faced with their impotent technological capability, many LDCs governments tended to privatize, under government control, the telecommunications equipment supply. Since 1968, Northern Electric Company is maintaining Turkey PTT local factory for manufacturing automatic telephone exchange in Istanbul; Mozambique contracted ITALCOM in 1984 for a $50 million supply of digital exchanges, ERICSON has been contracted by Algeria, Korea, Mexico to supply crossbar exchange equipment, digital telephone systems; THOMSON is providing 186. 000 digital exchange lines to Chile...(13).

We can now formulate observations concerning the dilemma of this public-private relationship in the particular environment of LDCs and the potential solution that could represent the basis to solve the problem of the information resources and services as principal contributors to socio-economic development.

The first outcomes of a prime observation to the entire environment of LDCs could be resumed in the following headlines traced by MARGHALANI(29) :

In my opinion, considering what has been evoked hitherto as very specific socio-economic common denominators for LDCs, the problem of ownership will remain persistent as long as both social and technological assets are not resolved. I perceive that for telecommunications as for any technological development both economic structures of public and private sectors should be involved. We only need to trace the real barriers where the attributions of one end and the other's begin. The technological availability in my belief, is worth to be put under free market control since no highly ranked local alternatives are available.

The economic structure of LDCs has not reached already an upgrade level of efficiency that permits a strict control on excessive abuses of monopoly franchises attributed to local technological equipment providers. In most of LDCs, the consumers are faced with "take it or leave it" behaviors on the part of suppliers. Although there is a noticeable move towards computing literacy, the economic restrictions (expensive local items and highly taxed imported devices) are strongly hampering the overspread of new technologies. An open competition will multiply and increase the technological infrastructure which is an essential stimuli to improve the indigenous awareness and involvement in information use. However, and in order to refrain probable excessive freedom of privatization, regulations need to be a bar to control private ownership. These regulations should also be firmly implemented to ascertain more efficiency gains.

In case of the information access and availability, I believe that the actual situation in LDCs is not yet favorable to cut down government subsidy and put any kind of charge to information use. The private provision will be very reliable on the social awareness about information which I think could be simulated and reoriented throughout the technological availability.

From another standpoint, "history has shown that a period of political and legal stability precedes the development of technology in a given society and stability may be an essential prerequisite for systematic technological development"(47)

In sum, what I may conclude at this point is that although privatization of information resources and services might appear as a pure economic issue, the practical environment showed that it could also be a question of political, social, cultural, linguistic and even religious parameters which could easily be determinant contributors to the success or failure of such economic policy.

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