US Privatization Politically Tough

ONE irony in Washington is that the Bush administration urges third-world nations to privatize government-owned companies while ducking many of the same issues at home. The government is talking out of both sides of its mouth, says Robert Poole Jr., president of Reason Foundation, a public-policy research group based in Santa Monica, Calif.

Both directly and indirectly through the International Monetary Fund and the World Bank, the United States has been advising developing countries to unload lossmaking state-owned enterprises to make their economies more efficient.

But in the US, privatization moves at a turtle pace.

The job of the associate director for privatization in the Office of Management and Budget has been downgraded. The position was created under President Reagan in 1987 with the goal of selling off government assets and contracting more government work to private enterprise. Now the appointee to that position has been given several other unrelated functions.

``That [privatization] effort has just about collapsed,'' says Mr. Poole. Unless pushed, the bureaucracy prefers the status quo to turning over government services or projects to usually more efficient and cheaper private companies.

In a new study, the Reason Foundation lists $316 billion of government assets that could be privatized. If all these assets were sold, the government would not only get the one-time return from their sale but could reduce annual interest on the federal debt by $28.6 billion, eliminate federal subsidies of $6.4 billion, and add $1.5 billion to its revenues from the corporate income tax, the foundation says.

The House of Representatives did move Tuesday on the sale of one group of assets - surplus military bases. It voted 381 to 43 to back a plan to close 86 military bases and scale back five more, thereby accepting the December recommendations of the Commission on Base Realignment and Closure.

The commission projected savings of $694 million in the first year and $5.6 billion over 20 years.

In other nations, privatization is thriving. The Reason Foundation calculates that $43 billion of government assets were sold last year. That makes a cumulative worldwide total of $160 billion over the past five years.

Britain and Japan continued to be the leading sellers, with British Steel and Nippon Telegraph & Telephone the largest of last year's share offerings.

The list of developing nations privatizing state enterprises is long. Nigeria, for example, will sell 67 government firms, including 12 banks and the nation's electric utility. Chile has sold $1 billion in state firms since 1985, leaving only 20 of 500 companies in state hands.

Privatization can also be defined as ``build-operate-transfer'' deals. In these a private company builds and operates a public facility for a set period of time. Then the facility reverts to public ownership.

Among such projects now under way are a 181-mile private tollway in China, a major power plant and rail transit system in Turkey, a new harbor tunnel in Sydney, and power plants in the Philippines, the Reason Foundation notes.

The swing in the communist world toward the private sector has been much written about.

The foundation, however, notes that the US ``is virtually alone in having no serious national commitment to privatization.''

During the Reagan presidency, Conrail was the only large federal enterprise sold off - for $1.6 billion in 1987. In 1988, the government reached an agreement to sell the Great Plains Coal Gasification plant for $600 million, spread out over the next 21 years. In 1987-88, Washington realized $4.6 billion from the sale of federal loan assets. President Reagan's fiscal 1990 budget calls for sale of $6.9 billion in loans to yield $5.8 billion in revenues.

At the state and local government level, the privatization trend continues heartily. By now, 36 percent of local governments hire private contractors to collect the garbage and repair the streets.

President Reagan's Commission on Privatization last year recommended that the government sell Amtrak, the Postal Service, and the Naval Petroleum Reserve. It suggested that the air traffic control system be sold to a nonprofit corporation owned by aviation users. The Bush budget calls for sale of the government's two commercial oil fields (Elk Hills, in California, and Teapot Dome, in Wyoming), the Alaska Power Administration, and a federal helium-producing facility.

But the potential for really big money comes from such things as the Tennessee Valley Authority ($12 billion) and the large power-marketing administrations ($14 billion), the sale of federal lands ($160 billion), the Postal Service ($11 billion), and federal airports ($3 billion). Congress will be slow to put these politically sensitive items on the auction block.