The modern approach of privatization

The modern approach of privatization 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. Denationalisation or divestiture can be the means to accomplish this. • Privatisation through liberalisation, 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 no 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. Privatisation as a 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. Privatisation 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 denationalisation. “Perspective Proposals have also been made that in some countries (for example, 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. Maximising the number of shareholders may be achieved by under pricing of share, which is in conflict with the aim to maximise the treasury income following the rules and perspectives of private sector phenomena.