New PR tactics, Belarus Edition

I’ve often lamented the lack of PR expertise that EPN has in Mexico (either that or he just pays them no mind).  Here are some new campaign tactics that I hadn’t thought of before, courtesy of Belarus’ President-for-life Alexander Lukashenko.  He released photos of him harvesting potatoes and melons at his official residence, apparently to show that he is a hard-working man of the people.  The produce yielded was then given to orphanages.  Here are some great pics from the show:

potatoes1

potatoes2

Note that it’s important to dress up for the photo op.  An old undershirt and boxer shorts will do just perfectly. (Note that he looks just like Stan Wawrinka winging this year’s French Open)

The article notes that this isn’t the first time Lukashenko has resorted to some odd photo ops.  Here he is with Gerard Depardieu “scything grass at the leader’s farm north of Minsk.”  Remind me not to visit him—sounds like he puts his guests to work (although it doesn’t look like Depardieu missed his calling as a farmer).

scythe

How not to privatize

S.P. Chakravarty and Jonathan Williams have a working paper called “Privatisation of Banks in Mexico and the Tequila Crisis.” I’ve read about the problems of bank privatization in Mexico before, but the paper does a good job of detailing what should have been some serious red flags in the process.  For instance:

a. “A successful bidder would use this grace period to source funds from various investors, and sometimes the acquired bank itself. In one case, 75 per cent of the cost of acquiring a privatised bank came from a loan from that bank, for which the collateral was the shares being acquired.”

b. Since the rationale for privatisation and the desire for raising money for the exchequer were not kept separate, the offer was made attractive by signalling to prospective buyers that they could “expect only very limited competition between banks”

c. “Lastly, three banks were acquired by bidder groups that lacked any financial sector experience.”

The authors demonstrate the conflict of interest present when governments are focused so exclusively on maximizing short term revenues.  Specifically, they find in the Mexican case that the “liberalisation process contributed to the subsequent financial crisis entailing the re-nationalisation of banks after a short period of three years at a cost to the exchequer which was five times greater than the money raised at privatization.” Obviously there were a lot of other factors involved in the tequila crisis, but the fragility of the banking sector didn’t help.

 

Privatization is not for the faint of heart

Pakistan suffers frequent power outages that have a huge negative cost on businesses and general quality of life (story here: “Pakistan utility company fights to power chaotic port megacity“).  Here is why privatization seems like an obvious choice:

1. “Power cuts lasting 12 hours a day or more have devastated Pakistan’s economy. The loss of millions of jobs has fuelled unrest in a nuclear-armed nation already beset by a Taliban insurgency.”

2. “At the state-run Peshawar Electricity Supply Company, the majority of staff are illiterate, most new hires are relatives of existing staff and 37 percent of power generated was stolen.”

In 2008, the government decided to privatize the Karachi Electric Supply Company. The new owners fired about 1/3 of the workers, cut off customers who didn’t pay their electric bills, and cracked down on people illegally tapping into the electric system.

The response was quite telling.  First, in a sign of how dysfunctional things were before privatization, fired workers offered to work for free because of the profitability of holding the post.  Apparently they don’t know much about efficiency wages.  Management told them no way, so they “camped outside the building for months” and more than “200 actual employees (who were forced to cross picket lines every day) were injured.”
Second, the new boss came under fire (literally) at his home.  Legislators tried to have him arrested for “not attending sub-committee meetings in the capital.” What in the world can these sub-committee meetings be and how could non-attendance be a jail-able offense? They sound instead like a huge waste of time and bureaucratic idiocy.
Third, the wealthy were offended that they might have to start paying for electricity.  In my favorite quote of the story, one wealthy man said “he couldn’t possibly start paying because his colleagues would think he had no influence left.” How would anyone know that he started paying?
Fourth, cracking down on illegal connections is dangerous business.  The mafia controls these connections and utility staff that take them down are often attacked.  Apparently 10 workers were taken hostage because of this last month. And some areas are too dangerous for workers to even enter: “Some slums are held by the Taliban or gangs, and KESC staff can’t even enter. They are experimenting with licensing powerful local businessmen to collect bills and cut off non-payers.”
Despite all of this, privatization actually seems to be working:

Last year the company made its first profit in 17 years. Theft has fallen by 9 percent in four years. Half the city, including two industrial zones, does not have daily power cuts.”

Perhaps the experience in Karachi will convince other cities of the benefits of privatization, although clearly buying and operating these utilities isn’t for the faint of heart.