Rook reviews

is, if anything, slowing down rather than speeding up. There are gloomy statistics and mounting political and social pressures, but the need for find- ing financially self-sustaining rural electrification schemes becomes more and more desperate as fewer and few- er are found, against todays in- creasingly stringent financial criteria.

A quotation from the book is apt here:

The dilemma facing governments, electric- ity utilities and rural electrification plan- ners is thus an acute one. The difficulty is to find a way of implementing what is increasingly recognised as a social and poli- tical necessity, but which analysis shows to be economically dubious or simply un- affordable financially.

Tom W. Berrie

County Durham, UK

Tantalizing taste of conference

PRIVATISATION IN DEVELOP-

ING COUNTRIES

ed by V. V. Ramanadham

Routledge, London, UK, 1989, pp 443

This volume is the result of a confer- ence held at Templeton College, Ox- ford in May 1988. The bulk of the book consists of a series of chapters on individual countries (and occasionally groups of countries - Africa, Jamaica, Trinidad and Tobago). These studies are wide-ranging not only geographi- cally (though there is some concentra- tion on Asia) but also in style and content. To some extent this reflects the different nature of the authors - a World Bank official writes about poli- cy in Africa, and the chapter on Malaysia is contributed by the Minis- try of Public Enterprises. They there- fore form a somewhat disparate col- lection, often tantalizing in the issues which are raised but not pursued, or which remain only implicit. This lack of coordination, inevitable in a volume such as this where individual authors bring their own expertise, perspective, experience and political background, makes this country speci- fic section better as a reference section for readers to investigate their own interests than as a continuous and coherent narrative.

More general issues of privatization in developing countries are tackled in the opening and closing sections of the book. Even here variety is evident, in the length of chapters and in their approach and style. The first and last chapters are written by the editor, and

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in the latter he provides an excellent summary of the individual country contributions, teasing out some com- mon themes. What the book inevit- ably illustrates is that there is more diversity than commonality - hardly surprising in a worldwide survey which encompasses economies as disparate as those of Jordan and China. This makes any consistent analysis difficult - but nevertheless vitally important, precisely because the theme of priva- tization, with its political overtones, has become such a universal rallying cry. The book shows that it is not a panacea for the difficulties of any group of nations, however defined, while retaining an appropriately cau- tious enthusiasm for some of its objec- tives.

Diversity is revealed also in the de- finition of privatization. Throughout the book the continuum of policies included under this title is apparent. The editor provides a helpful framework of various techniques, di- vided into ownership, organizational and operational measures (roughly corresponding to denationalization, liberalization and contracting out). However, since his chapter deals with the relevance of the UK experience it concentrates on denationalization, and contains detailed discussion on the mechanics of denationalization and its preparation. But the rest of the book shows clearly that for most de- veloping countries the priorities are the latter two of Ramanadham’s mod- es - organizational and operational measures, while the UK experience, particularly that documented in this chapter, is overwhelmingly of de-

nationalization. Thus the chapter falls a little between two stools - failing (quite appropriately in the context) to pursue some issues relevant to the UK such as natural monopoly, the state of the private markets and regulation, yet dealing at length with the mecha- nics of changing ownership in the UK where this may not be the target of many developing countries.

Regulation in the UK and USA is dealt with clearly and briefly else- where in the opening section. This is a particular aspect of a more general distributional problem which the book addresses from time to time. but in- evitably in a somewhat disjointed and inconclusive way -viz the distribution- al effects of privatization, and the political and economic impact on different groups. The workforce (if there is a history of overstaffing and overpay) and the consumers are likely to be most vulnerable, especially where losses may be changed to pro- fits through monopoly exploitation. These issues become especially impor- tant where the emphasis is so clearly on eliminating deficits for macroeco- nomic reasons. Macroeconomic im- plications and techniques are analysed in the first section, appropriately enough since the country specific chapters show that these are often over-riding considerations in develop- ing countries. The problem of de- nationalization where there are in- sufficient indigenous funds (and appropriately developed capital mar- kets) to launch a successful flotation is addressed. Indeed one of the many contradictions is that it is more diffi- cult to achieve success with any policy in countries where both product and capital markets are undeveloped. This was the original (economic) justifica- tion for public ownership, and it is ironic to see both individual govern- ments and international agencies re- commending privatization to achieve objectives which 30 years ago were to be pursued through nationalization. Many of the problems of market fail- ure remain, and undeveloped markets cannot provide the discipline which public ownership has failed to do.

The volume provides a tantalizing taste of what must have been an in- teresting and stimulating workshop,

UTILITIES POLICY October 1991

enriched by the variety of contributors and countries. In book form this varie- ty is a little indigestible, and the read- er needs to be selective. It would certainly be a difficult introduction to the subject, but forms a useful refer- ence for those already familiar with the issues, and who can recognize the gaps. Some ommissions are merely a function of the timing of the confer- ence and the pace at which events have since moved. There is little dis- cussion of social costs and the issue of environmental pollution and desecra- tion, now so important in privatization

programmes worldwide. Similarly the new privatization programmes in parts of Latin America (particularly Mexico and Brazil) raise interesting issues of debt-equity swops in conjunction with privatization. We may look forward to the inclusion of these topics in the next conference and its report. Meanwhile this book underlines the unique nature of privatization in each economy and constitutes a useful compendium for the informed reader.

Cutherine Price University of Leicester

Leicester, UK

Useful compendia of past concepts

ENERGY ANALYSIS AND POLICY

by M. Munasinghe

Butterworths, Guildford, UK, 1990,

PP 315

ELECTRIC POWER ECONOMICS

by M. Munasinghe

Butterworths, Guildford, UK, 1990,

PP 323

Both of these somewhat com- plementary volumes were published at the same time, and are both described as ‘selected works’ of the author, which is apt in that most, if not all, the substance in the chapters has appeared before. These compendia are very useful as the various con- densations are to the benefit of the reader, especially as they are gathered in two volumes - Munasinghe’s works are quite formidable in both number and scope!

Because these books contain selected works from the past they must of course be judged from what seemed important in the past. Although many previous concepts are being rapidly either overhauled, mod- ified or abandoned, this will not hap- pen overnight. The impressive base- work and background built up in the

UTILITIES POLICY October 1991

1970s and early to mid-1980s by Munasinghe and other workers in the field is still a vital part of energy, electricity and utilities policy, plan- ning, investment, operation and pric- ing. The basic framework of such work was to express the importance of, and establish methodologies and models for, dealing with such issues as:

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The three levels in a national eco- nomy, the nation, the sector and the consumer. How each level was linked to the other but led by dif- ferent criteria for policy, planning, investment, pricing etc. The optimization of long-term de- velopment programming, mainly with respect to the highest level (ie the national economy), the opti- mization to internalize as many fea- tures on the demand-side as possi- ble, as well as the supply-side, eg reliability standards, quality of sup- plies, resources costs, energy effi- ciency, energy management and conservation and environmental control. The setting of prices which were fully in accordance with the opti- mum long-term development prog- ramme, through long-run marginal costs (LRMC) but also allowing for ‘life-line’ tariffs to the poor. The development of ‘user-friendly’ computer models to enable senior

Book reviews

management to participate more directly in planning, operation and pricing; also to enable them to quickly ‘test out’ their own, poss- ibly entrepreneurial ideas, quickly on a model before making final decisions on investment, policy and pricing.

Although this approach was, and still is, widely-used by developed and de- veloping countries, from the perspec- tive of the 1990s many believe now that it was really developed and is basically useful for dealing with well- developed energy, electricity and utili- ties sectors in developed, and the most industrialized developing countries, where there exists the necessary data, skills, management and finance to use it properly. Regardless of this conclu- sion, this well-disciplined logical, de- terministic approach is today being criticized from the point of view of ex-post evaluation.

In any case, world events have dic- tated the pace of change and all practi- tioners in the energy, electricity and utilities sectors must today drastically modify their approaches to planning, policy, investment, pricing, operation, etc, to take into account the dominant factors worldwide for the 1990s and beyond. These factors include: private funding and ownership; short-term financial and not long-term economic returns; entrepreneurship in planning; feasible scenarios instead of more rigidly determined optimum develop- ment programmes; dynamic and ‘spot’

pricing; buying forward; futures mar- kets; agents; brokers; activities which treat energy as a commodity; consum- er reaction, fully clearing, more effi- cient energy, electricity and utilities markets; regulatory authorities.

Munasinghe has made a good start with these new’ features in his ex- isting works and all must look forward to the publication of his researches in these matters in due coursee. In this respect these two volumes are some- what out-of-date but nevertheless re-

main very valuable work, and on some matters are still very relevant.

For example, in Energy Analysis and Policy it is still important to stress Munasinghe’s integrated national energy planning in developing coun- tries especially, but indeed in all coun-

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