reason for privatization

Topics: Privatization, Property, Public sector Pages: 2 (486 words) Published: February 25, 2014
My reason for privatization

To promote efficiency. This is because; one common problem facing the public sector is bad attitude towards work. In that respect, if the sector is privatized, the new management would instill a strict routine check on the workers thereby increasing efficiency. Privatisation, also spelled privatization, may have several meanings. Primarily, it is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a nonprofit organization. It may also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management. Privatization has also been used to describe two unrelated transactions. The first is the buying of all outstanding shares of a publicly traded company by a single entity, making the company privately owned. This is often described as private equity. The second is a demutualization of a mutual organization or cooperative to form a joint-stock company.

There are four main methods of privatization:
1. Share issue privatization (SIP) - selling shares on the stock market 2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model 3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price. 4. Privatization from below - Start-up of new private businesses in formerly socialist countries. Choice of sale method is influenced by the capital market, political, and firm-specific factors. SIPs are more likely to be used when capital markets are less developed or under developed and there is lower income inequality. Share issues can broaden and deepen domestic capital markets, boosting liquidity and (potentially) economic growth, but if the capital markets are...
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