Privatization Policy and Enterprise Performance: The case of Ireland

Compared to other industrialized economies Ireland has been slow to privatize state-owed enterprises. The first divestitures in 1991 failed to trigger a systematic programme of sell-offs due to fears of job losses in an economy characterized by low rates of growth and high levels of unemployment. Where subsequent sales occurred they took place on a pragmatic and case-by-case basis with the reasons for privatization varying across companies. Some of the earlier sales took place because the enterprises were financially unviable whereas more recent sales can be attributed to the influence of EU policy on competition and restrictions on state aids. Since the privatization of the state telecommunications company in 1999 there has been a significant increase in privatization activity and most of the remaining public enterprises are candidates for divestiture. By 2001 total revenues amounted to €8.1bn (9 per cent of GNP for 2001). A consistent justification for privatization has been that a change in ownership will lead to improved performance. The analysis in this paper fails to support this argument. At this early stage of the programe the experience has been for cost-cutting measures to lead to improved performance prior to privatization with little evidence of continued improvements after divestiture.