For many nations, privatization has become the only effective method of raising investment capital on favorable terms. High levels of past public sector borrowing have saddled many nations with large levels of debt. As a consequence, these nations have had little recourse but to sell state assets to reduce debt, generate revenue, and raise investment capital {see Endnote 3}.

Countries as different as the United Kingdom and Chile have led the way in privatization. Countries as different as Peru and Poland have followed. Between 1988 and 1993, roughly 2,700 state-owned enterprises in over 95 countries were transferred to private individuals, raising over $270 billion {see Endnote 4}. In Western Europe, the United Kingdom was at the forefront of privatization. Britain has raised $95 billion through the privatization of formerly state-owned enterprises {see Endnote 5}.

Various businesses have been privatized besides oil. Indeed, the largest privatization to date has been the sale of Japanese Telecom for $73 billion {see Endnote 6}. In the United Kingdom, public housing has been privatized and, in the United States, many municipal services, such as waste disposal, have been privatized.

Although privatization efforts differ substantially from country to country, there is a strong comon economic rationale underlying the various decisions to privatize state energy resources. In general, nations have privatized state-owned energy industries to achieve one or more of several objectives. These objectives include: 1) raising revenue for the state; 2) raising investment capital for the industry or company being privatized; 3) reducing government's role in the economy; 4) promoting wider share ownership; 5) increasing efficiency; 6) introducing greater competition; and 7) exposing firms to market discipline {see Endnote 7}.

Privatization is closely connected with the development of the international energy company--a company whose focus is becoming both more global and more multi-purpose. Until recently, outside of the world's few major integrated oil companies, only a handful of energy companies were considered multinational. Currently, in addition to the scores of petroleum companies that can now be classified as multinational, the scope of many coal companies, petroleum pipeline companies, electric utilities, and power generation equipment and construction companies, has become increasingly global. Through consolidations, mergers, acquisitions, and strategic alliances, the world's energy companies have also become more integrated. Oil and gas companies have become electricity companies; domestic regional electric utilities have become multinational electricity companies; electricity distribution companies have become generation companies; and generation companies have become distribution and transmission companies.