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OUTLINE
OBJECTIVE OF INVESTMENT POLICY REFORMS
INVESTMENT POLICY REFORMS PHILOSOPHY
POLICY REFORMS ENABLERS
MANAGING PRIVATISATION PROGRAMME IN TIMES OF POLITICAL TRANSITION
CHALLENGES OF MANAGING REFORMS IN TIMES OF POLITICAL TRANSITION
EXAMPLES OF BPE PREVIOUS REFORM ACTIVITIES: ENABLING LAWS & MANAGEMENT APPROACH
OUTSTANDING REFORMS & PENDING BILLS/LAWS
OTHER COUNTRY EXPERIENCES
CONCLUSION2
WHY Investment Policy Reforms?
Investment Policy Reform
Quality Investment Policy
Favourable Investment Climate
High Levels of Investment
Growth & Socioeconomic Development
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Investment Reforms Philosophy
Government should legislate, regulate and tax businesses, not to be an operator or compete with its citizens/private sector.
Government should forge partnerships with the private sector and other stakeholders in policy formulation and implementation
Reform is a non-linear, dynamic process and there are two main stages of reform, each with its own set of challenges and processes:
- Initiating and designing stage— This involves identifying priorities for reform, getting reform onto the agenda, developing reform proposals, and building acceptance for reform; and
- Implementing and sustaining reform— involves strengthening the incentives and capacity to implement reform and creating institutional mechanisms to monitor and sustain reform.
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Non-linear Nature of Reform
“Linear analysis will get you a much changed caterpillar but it won’t get you a butterfly. For that you need a leap of imagination”
( Robert L. Hutchings)
Therefore for the purpose of this discussion, we shall focus on PRIVATISATION PROGRAMME (the main thrust of the Federal Government socio-economic
reform policy) and discuss how it is being managed in times of political transition.
KEY ENABLERS OF MANAGING REFORM POLICY:
a) Enabling law/strong political foundation
b) Stakeholder engagement & Transparent/dynamic project management approach 5
Investment Policy Reform Enablers
Enabling Environmental Prerequisites- Political Will- Robust Laws- Stakeholders’ buy-in- Strong Independent Regulation- Transparency/Integrity of Process- Strong Project Management- Cost Effective Arbitration- Exchange Rate Stability- Good Sovereign Credit Rating - Policy Consistency 6
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Privatization Programme Enablers & Management Approach Robust Law - The Public Enterprises (Privatisation and
Commercialisation) Act No.28 of 1999 provides for:
- National Council on Privatisation (NCP) as policy body
- Vice-President as Chairman of NCP – strong political champion
- Membership of NCP consisting of government (Ministers, relevant heads
of government parastatals), private sector and labour – Political
will/enabling institutional framework & stakeholder involvement
- Bureau of Public Enterprises as implementing agency- institutional
structure
- Establishment of Sectors Steering Committees with Ministers as
Chairmen of the Committees - enabling institutional structure
Clear Policy objectives
- To improve efficiency & reduce waste in public sector
- To diversify economy & strengthen private sector as engine of economic
growth
Privatisation Programme Enablers & Management Approach: cont DEVELOPMENT OF APPROPRIATE REGULATORY & INSTITUTIONAL
ENVIRONMENT – in accordance with the provision of 1999 Privatisation Act • Appropriate policies, legislation and regulation that support and
protect investments are fundamental to private sector participation in any country ‘s reform programme.
• The law also helps in the management of the reforms in times of political transition or otherwise since it guides the process and the participants.
• Good example is the Nigerian telecommunications sector – the Telecoms Act 2003 opened up the sector and established NCC.
• The Electric Power Sector Reform Act (EPSRA) 2005 is guiding the ongoing Power Sector Reform and established NERC
PUBLIC ENLIGHTENMENT AND STAKEHOLDER ENGAGEMENT• Having the laws in place is not sufficient. It is important that the public &
stakeholders are educated, involved & engaged at the conception and implementation stage of reform programme.
• Examples of stakeholders engagement effort for the ongoing Power Sector Reform are as follows:
Mr. President launched the Road Map in August 2010; Held Presidential Retreat on Power in 2010; BPE hosted Investor Roadshow across the world in Jan & Feb. 2011; BPE is currently engaging Labour Unions to resolve contending issues and
ensure successful reform 8
Privatisation Programme Enablers: cont
FGN providing additional and ACCESSIBLE incentives to the private sector (Duty waivers, Tax exemption etc) –
Securitization - working with international institutions such as the World Bank to provide a range of financial instruments to mitigate financial risks (e.g. the PRG that is being structured for the Power Sector Reform).
PUBLISHING & POPULARIZING ACHIEVEMENTS OF PAST REFORMS – This is to encourage & boost investors’ confidence in the ability of the country or its institutions in project or reform management.
CONTRACT ENFORCEMENT/EFFECTIVE ABRITRATION PROCESS: It is important that effective and efficient contract enforcement/adjudication process is institutionalized.
POLICY CONSISTENCY
This is highly important to boost investors confidence. Private sector would be attracted/encouraged to invest in an economy or environment with low or no record of policy reversal.
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Challenges of Managing Privatisation Programme in times of Political Transition Notwithstanding the existence of enabling laws and
application of transparent/dynamic project management approach, privatization still faces some challenges:
Reform suffers loss of momentum It is always difficult to maintain momentum of reform activities,
plans and programme in times of political transition . Project workplan and deliverables are usually distorted or
prolonged
Reform Reversal
In recent past, some privatisation transactions suffered cancellation, reversal or suspension in times of political transition e.g.
• Lagos International Trade Fair Complex, National Theatre, Iganmu & Tafawa Balewa Square concessioning were delayed
• Airports Concession was cancelled
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Challenges of Managing Privatisation Programme in times of Political Transition contStakeholders & Political Opposition’s Apathy/Resistance
Political opposition and some stakeholders usually take advantage of political transition to launch attacks and discredit reform programmes (e.g. the continuous unsuccessful campaign against Ports Reform)
Labour Resistance
Labour usually exploits political transition to increase agitation and resistance to reform programmes or policies (e.g. the 2007 labour resistance cum strike action to stop privatisation of refineries)
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Few examples of BPE Reform Activities: Enabling Laws & Management Approach
In spite of the challenges, these are few examples of BPE reform activities that have been sustained irrespective of political events
TelecomsProduced new National Telecoms Policy in 2002
Investor-friendly Telecoms Act enacted in 2003 Enabled issuance of GSM & Fixed Wireless Licenses Paved way for ‘telecom revolution’ in the country MTN, Glo & Airtel and other private network operators are
blossoming and doing good in their businesses Established NCC to regulate the sector
Solid MineralsNew National Policy on Solid Minerals produced -2006Mining and Minerals Act enacted -2007
Aimed at entrenching private sector led minerals sector development
Some of the Mining titles have been concessioned
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Examples of BPE Reform Activities: Enabling Laws & Sustainable Management Approach Adopted
The remaining Mining titles are to be concessioned in 2011 in collaboration with Ministry of Mines & Steel Development .
Power Sector Policy, 2001• Aimed at ensuring electricity supply that meets the needs of the economy by
involving private sector investment and managerial expertise
Investor friendly Power Sector Reform Act passed 2005• PHCN unbundled into six generating companies; eleven distribution
companies & one transmission company -2005 (6-1-11 configuration)• These 18 successor companies have been corporatized and legal instrument
transferring assets, liabilities and employees of PHCN to the successor companies signed
• Nigeria Electricity Regulatory Commission (NERC) established as independent regulator -2006
• Development of competitive electricity market in progress• Privatisation and concessioning of the Successor Companies are on course.• Securitisation arrangement is ongoing to mitigate financial and regulatory
risks• Bulk Trading Company Plc & NELMCO have been established and
corporatised.
Outstanding Reforms and Pending Bills
Outstanding Reforms & Pending/Required Bills/Laws
Without the urgent passage of 7 critical sector reform Bills into law, the gains of the last several years and future reforms would be impossible and unsustainable. The Bills are as follows;
Gas Bill provides for:- Separate legal and regulatory regime for the downstream gas
sector- Gas Regulator Commission, Nigerian Gas Transportation
Company, and Nigerian Gas Marketing Company- Awaiting Federal Executive Council (FEC) consideration for
onward passage to National Assembly for enactment into law
Petroleum Industry Reform Bill provides for:- Legal and regulatory framework, market-based pricing,
elimination of regulatory distortion- Open market downstream petroleum sector to encourage
private sector investment- The bill has been diluted by some stakeholders with varying
interests15
Reforms & Required Bills/Laws: cont
Ports and Harbour Authorities Bill - Repeals Nigerian Ports Authority Act No. 38, 1999 and provides for:- The establishment of the Landlord Port Model, whereby the Port
Authorities will be landlords on behalf of the Federal Government- Private sector participation in the provision of ports services -
drives efficiency, safety, accountability, competition, fairness, transparency
- Awaiting FEC consideration
Nigerian Railway Bill - Repeals Nigerian Railway Corporation Act 1955:- Limits role of Federal Government to procurement of railway
services and infrastructure through Concessions- Protects rights and interests of licensees, customers and other
stakeholders- Provides basis for regulation by National Transport Commission- Awaiting FEC consideration
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Reforms & Required Bills/Laws: cont
National Transport Commission Bill:
- Provides economic regulatory framework for intermodal industry
- Provides for independent regulator (National Transport
Commission)
- NTC will monitor compliance of government agencies and service
providers
- Awaiting FEC consideration
Inland Waterways Bill - repeals National Inland Waterways
Act No. 13 1997:
- Framework for ownership, management, control, operation and
development of inland water ways
- Creates conducive environment for private sector investment &
participation
- Awaiting FEC consideration17
Reforms & Required Bills/Laws: cont.
Federal Competition Commission Bill fosters growth, open
economy, puts ‘multiplier to work’
- Prohibits price fixing, bid rigging, price discrimination, fixing
quotas
- Prevents concentration of economic, political power, ownership
- Prohibits monopolies/Regulates mergers, takeovers and
acquisitions
- Stimulates economic growth through competition, efficiency,
trade and commerce, promotes consumer welfare
- Liberal access drives increased participation in the economy
- Awaiting FEC consideration
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Other Country Experiences
Reform policy and especially privatisation received its strongest political foundation and support from the following world leaders:
• British Prime Minister, Margaret Thatcher ( from 1979–1990)• U.S. President, Ronald Reagan (1980–1988), and • Chilean President, Augusto Pinochet (president from 1974–
1990)
The political will and decisiveness of those leaders were supported with a robust legal environment/effective & dynamic institutional structures:- Chile enacted Decree 211 (1973) which classifies any act tending to
impede free competition as an infraction- The Decree also established three agencies in charge of defending and
promoting free competition: the two Antitrust Commissions known as the Preventive Commission (Comisión Preventiva) and the Resolutory Commission (Comisión Resolutiva); and
- The National Economic Prosecutor’s Office (Fiscalía Nacional Económica)
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Other countries experiences cont.
In addition, the 3 countries enjoyed political stability – critical factor to successful reform/socio -economic growth
India is one example of a developing nation where reform (privatisation) was implicitly implemented & politically managedNo written privatisation policy or law – the Industrial policy
statement of July 24, 1991 was the policy umbrella under which privatisation was implemented. The policy allows these 3 reform elements:
Disinvestment of Public Sector Undertakings (PSUs) - privatisationClosure of sick PSUs – privatisation Liberalization – reform (privatisation)
It was designed to disarm critics and prevent government from wasting time in defending privatisation rhetoric
It is also a calibrated policy move to assuage political opposition
As a result, Foreign Direct Investment (FDI) to India grew from $97million as at 1990/91 to $32.4bilion in 2007/2008 20
ConclusionReform is a non-linear dynamic process for economy diversification
Reform objective is to also strengthen private sector as engine of economic growth
Government political will is the primary enabler for any reform
Other supporting enablers are : Robust Law Strong institutional structure Stakeholders' buy-in Effective arbitration process etc
Having a strong political foundation is not sufficient. Managing privatization (the main thrust of Federal Government reform policy) in times of political transition demands the following amongst others:
Coordinated application of a wide range of skills and expertise in project management;
Application of regulatory tools and incentive programs; and Transparency and accountability in the contractual,
regulatory and operational framework.
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Thank you!