Distributional Impact of Privatization: The Sri Lankan Experience

The literature on privatization suggests that its impacts on firm level efficiency have generally been positive. However, privatization has not been a very popular reform in the face of unfavourable real and perceived distributional effects. This project, sponsored by the Centre for Global Development, Washington D.C. addresses a key policy concern: what has actually happened to distribution during and because of privatization? The project was conducted simultaneously in a sample of countries from Latin America, Sub-Saharan Africa, the transition (post-communist) states, and Asia.

The Sri Lanka case study described and analyzed Sri Lanka ‘s privatization experience within a comprehensive conceptual framework designed to capture the distributional impacts of the process. The research looked at specific variables such as macroeconomic concerns, ownership issues, employment, prices and access, and political economy factors and concluded that the welfare effects of the privatization process have been less than satisfactory, that the relatively poor have had little or no gain from the reform process, and that the government’s commitment to distributional ends appears to be questionable with fiscal objectives being prioritized over an equitable allocation of assets.

Research team

Malathy Knight-John