Xxxiv an Economic Analysis of Privitisation in Ireland , 1991 - 2003

Although a late starter with regard to privatising State Owned Enterprises (SOEs), Ireland was recently ranked 8 among OECD countries in terms of relative privatisation activity. This paper presents the first detailed analysis of the programme since the first divestiture in 1991. It explores how the rationale for selling SOEs has evolved and argues that privatisation has been pursued on the basis of multiple (sometimes conflicting) objectives. One goal that has been common to all divestitures has been that of improving company performance. Although we find evidence that SOEs achieve ‘static’ efficiency gains in the preprivatisation period, the available evidence fails to support the hypothesis that privatisation brings about sustained improvements in enterprise performance. Privatisation has also been pursued in order to raise exchequer revenues and achieve certain distributional goals. Although the levels of share discounts and expenses have been low by international standards the government has foregone significant revenues by granting sizeable share ownerships to workers. Consequently workers along with institutional investors rank among the ‘winners’ from privatisation whereas small shareholders (in the case of Eircom) and the exchequer have incurred significant losses. Importantly, there is little to suggest that privatisation per se has yielded significant gains to the consumer. This raises questions about the sequencing of measures of privatisation and liberalisation.