Privatization can make governments more efficient, encourage investment, and create new growth and employment. Such economic benefits help free public resources for infrastructure improvements and social programs. This paper reviews the ways in which countries with state-owned enterprises (SOEs) privatized such enterprises. It shows why SOEs usually perform more efficiently when they become private enterprises and why the privatization process can work well, even in poor countries. The authors review the Bank Group's involvement in privatization efforts in developing countries. They examine the economic and social reasons why such countries chose to privatize their SOEs. Citing cases from industrial and developing countries, the study discusses the many benefits privatization has provided. Among these benefits are improved domestic welfare, faster growth, and greater cost containment. Two major factors that affect the success of privatization are analyzed: 1) the market into which the enterprise will be divested; 2) the country's economic environment, such as national economic policies and regulations affecting private enterprise. The report provides governments with guidelines for privatizing SOEs. These recommendations include financing, preparing for a sale, pricing and valuation, and managing a transaction successfully. In addition, the authors survey new methods being used by countries in Eastern Europe and in Central Asia to privatize their SOEs.