Major Impact of Privatization of Economy
The word privatization has been a point of attention in the worldwide business sectors. It simply means the shifting of authority and management of public sector enterprises to private ownership. Thus the control and power of decision making is also shifted from the governmental bodies to private persons. The objective of privatization of economy is to improve the quality of service given by the public authorities.
In most of the developing countries, the burden of the public authorities to increase the revenue of the state is high since the tax evasion and failure to generate the national income increases. Here arises the scope of privatization as the budgetary resources can be increased and the foreign debts issues can also handled smoothly. There are many advantages of privatization. Some of them are noted below:
- Efficient management
- More allocation of funds
- Profitability increase
- Increased industrial growth rate
- Innovations with investments
- Reduced interference by the political parties
- Promotion of globalization
- Faster decision making process and readdress
The three sets of measures which privatization can cover are:
- Ownership measures
Here, the ownership of the public enterprises is transferred to the private persons either partly or fully. Moreover, higher the proportion of transfer of ownership, higher the degree of privatization. The various forms of ownership transfer can be joint ventures, total denationalization, and liquidation or buy out (management).
- Organizational measures
The state control is limited by the introduction of numerous organizational measures like leasing, holding a company or restructuring.
- Operational measures
The efficiency of the services and operations are improved by way of commercialization. The measures to increase the performance of employees are also taken here.
There are many demerits for privatization like workers retrenchment, high pricing, lower asset concentration, transparency. This brings opposition from many economy sectors.