Where commercialization or demonopolization of public enterprises are planned by policy-makers as intermediate steps towards privatization, it may be difficult to maximize the efficiency of such enterprises because of lack of motivation of workers and management who know that privatization is the ultimate objective. It may also be difficult to undertake extensive reforms whose costs may not be recouped in the sale price of an enterprise.
[Industrialized countries] More than £23 million were lost through negligence and mismanagement of prison enterprises in the UK in 1985. There was concern in that case to distinguish between "limited efficiency", which is seen as desirable, and "inefficiency and neglect", which is what took place. Britain's private sector steel industry was complaining in 1992 of unfair competition and market distortion resulting from state-controlled steel enterprises in the EEC/EU.
2. While there are numerous examples of inefficient public enterprises in developing countries, this may be due more to general government policies or to overall economic environment than to deficiencies with the public enterprises themselves. Since privatization of them is often preceded or accompanied by commercialization and/or demonopolization of the firm concerned, as well as by wider economic reforms, it is in practice difficult to be sure which improvements in a firm's performance or in consumer welfare arose solely from privatization. The evidence suggests that public enterprises in developing or other countries are not necessarily less efficient than private firms in those countries.