Let’s Talk about Privatization
“The term privatization involves a change in the ownership of an enterprise from public to private sector. ”
In many developing countries, there is a need for more and more investments to maintain the pace of progress. Since public sector units in these countries have not been able to create required funds for further expansion and diversification, these resources should be raised from the private sector.The government should disinvest in those units where it has not been able to increase funds. During eighties there was the wave of privatization in socialistic countries which were earlier relying on public sector. The public sector could not deliver the goods in these countries so there was a talk of economic reforms.
The privatization wave that swept the world had is impact on the developing and underdeveloped countries too. The talk of privatization started in these countries when their governments announced in the provisional budget the intention of the government to disinvest at least 10-20 % of state investment in a few public sector units (PSU). They were to be passed on to private sector because the public sector had not been able to cope with the speedy industrialization at the international level.
The term privatization involves a change in the ownership of the enterprise from public to private sector. The whole public sector unit may be transferred or a part of its investment may be disinvested. It involves dilution of equity in favor of general public or non-government agencies. Profit motive has a major role to play in the changed scenario.
The change of ownership may take place by selling whole of the enterprise. The private management can be brought into public sector units even without transferring ownership. This can be done by leasing out the public sector units to private parties.
There can be sub-contracting of the enterprise too. Another alternative in privatization may be through managerial reforms. There may be an understanding with the controlling ministry of the enterprise regarding independence of working.
The management of the enterprise may be given independence in managerial areas. The management is empowered to operate as per market rules. In case of need the unit may be split up into more units for creating an element of competition.
Author - DeeKay
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