2cases on a technical level is a so-called cost-benefit analysis that compares the totalexpected benefit from a privatization against the cost of its implementation. In orderfor such an analysis to be complete, both the social dimension and the socialdividend resulting from privatization has to be captured.
Negative consequences and obstacles
Careful planning is essential, especially during the phase of creating the privatizationbody (a committee or a special purpose company) and its staffing. Ignorance of therules of the domestic and foreign markets and lack of transparency will mostcertainly lead to questioning these choices in a political and social level, thusresulting in long delays.The management of the privatization body will be required to provide specializedsolutions to a variety of problems, the most important being the following:a) Unclear legal status,b) Ownership issues,c) Reactions from the unions,d) Accusations for mismanagement.Proper design of the body, its operating rules and solutions to the above-mentionedproblems will largely determine the success of the privatization program in Greece.In Greece the respective body is called the Hellenic Republic Asset DevelopmentFund. Despite its foundation in 2011 and the recent change in its management, noreal progress has been demonstrated yet.
General principles of privatization
In my opinion, the four most important principles of a privatization program are:
Partial or total involvement of private equityThe change of ownership alone is not a panacea. It must be accompanied by anextended restructuring of the organization, along with a complete rearrangement of its strategy and objectives. Even for companies where the majority of the sharesremains to the state, there is a potential for increased competitiveness with privateparticipation in the shareholder scheme.
TimingTiming is one of the most critical factors for success when privatizing anorganization. In times of political instability, a lot of investors are reluctant to investand, even if they do, the price they are willing to pay is far lower than the marketvalue due to the actual investment risk.
Independence and control of the privatization body