Privatization involves the transfer of ownership and the management of state owned enterprises to private firms. Governments should be less corrupted so as to increase the efficiency of state owned corporations and the public sector, promoting national security. Recently, pressure from the IMF and World Bank, has made privatization a major dimension in the worldwide capital market. Many countries and regions are directly adopting this as most of them had historically taken a direct role in the economy, security, social policy, control of enterprises, prevention of inequality and the ownership of national assets (Ioannis).
However, due to limited budgets, governments have been unable to develop all part of the economy equally. Further problems like inadequate use of knowledge, experience and specialization in the management of the various sectors occur and citizens may not receive goods and services from the public enterprises effectively. Lack of competition in the public sector contributes a great deal in the inefficiencies, corruption and lack of motivation in public enterprises (Khan et al).
The main reason governments have opted for privatization is the belief that private firms can make a more efficient and effective use of available resources than governments and at the same time profit the government from the higher revenues Privatization creates. It is also believed that Privatization may result to increased efficiency productivity and liquidity in the financial markets but on the other hand, lead to unemployment and dependency on foreign capital from multinational companies hence decline in a nation's wealth and social welfare (Han). Full Privatization may have occurred especially in the services sector but it is generally not ideal for governments to conduct a full Privatization. Where natural resources and sensitive goods and or services for instance nuclear energy, partial Privatization is preferred. In this case, the government gives part of the ownership to a private firm, so that it can still have active control in the operations.
[...] This greatly contributes to the national output. Privatization also leads to change in the economic prospects that allow profit-maximising investors and entrepreneurs be the major source of economic performance (Borisova et al). Operational efficiency leads to reduced production costs. Pressure from politics and other government operations that direct firm's activities are eliminated and hence improve market efficiency. After Privatization, large subsidies or other special grants and economic considerations are greatly reduced. Profitability of the privatised firms is expected in most cases given public enterprises in most cases make little to no profits (Matsumura and Shimizu). [...]
[...] Document. Khan, Tariq, Ahmed, Naseer and Mahmood, Khalid. “Privatization Effects on Consumers and Employees: A Literature Review.” International Journal of Management (2012): 474-484. Print. Matsumura, Toshihiro and Shimizu, Daisuke. Privitization Waves: The Manchester School Privatization Waves. Manchester print. Doi: 10.1111 /j.1467- 9957.2009 .02147.x Walailuck, Chavanasporn and Christian-Oliver, Ewald. Privatization of businesses and flexible investment: a real option approach. New York: Springer-Verlag Print. [...]
[...] Evidence from Privatization.” Review of Financial Studies (2011): 2693-2737. Print. Han, Lihua. Strategic Privatization and Trade Policies in an International Mixed Oligopoly. Manchester Document. Doi: 10.1111 /j.1467- 9957.2011 .02245.x Ioannis, N. Kallianiotis. “Privatization and its Effect on European Unemployment.” Northeast Business & Economics Association 35th Annual conference. Ed. University of Scranton. Scranton: The Arthur J. Kania School of Management 99-103. [...]
[...] It is also believed that Privatization may result to increased efficiency productivity and liquidity in the financial markets but on the other hand, lead to unemployment and dependency on foreign capital from multinational companies hence decline in a nation's wealth and social welfare (Han). Full Privatization may have occurred especially in the services sector but it is generally not ideal for governments to conduct a full Privatization. Where natural resources and sensitive goods and or services for instance nuclear energy, partial Privatization is preferred. In this case, the government gives part of the ownership to a private firm, so that it can still have active control in the operations. [...]
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