The concept of privatization
Suffice it to say that the modern approach of privatization relates to
the remarkable statement was that in 1988, Cook and Kirkpatrick have
identified three main approaches to privatisation:
• Change in the ownership of an enterprise from the public to private
sector. Denationalization or divestiture can be the means to accomplish
this.
• Privatization through liberalization, or deregulation, of entry into
activities previously restricted to public sector enterprises.
It is
argued that the removal of restrictions is intended to increase the role
of competition in the hitherto protected market, a variant of
privatisation will have occurred, even though the transfer of ownership
of assets has been involved.
• Where the provision of a good and service is transferred from the
public to private sector, while the government retains ultimate
responsibility for supplying the service. Franchising or
contracting-out, of public services and the leasing of public assets to
the private sectors are examples. Privatization as policy has been allied with various objectives.
Introduction or extension of market forces reflected in the profit
motive, competition, greater efficiency and innovation are expected to
benefit the consumers.
Privatization policy has also been linked with a
longing for wider share ownership and a creation of share-owning
democratic system; while in some cases, the policy aims to trim down the
size of the public sector through the policy of nationalization.
“Perspective Proposals have also been made that in some countries like UK, Malaysia, China and South Africa); the real purpose of the
policy is to reduce the monopoly power of the public sector trade
unions”. But some of the above objectives may be in conflict.
Reducing
the size of the public sector by selling public assets may not be
compatible with the goal of efficiency if it involves merely
transferring monopoly power from the public to the private sector
without ensuring competition and rivalry. Maximizing the number of
shareholders may be achieved by under pricing of share, which is in
conflict with the aim to maximize the treasury income following the
rules and perspectives of private sector phenomena.
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