Privatization and Government

Topics: Privatization, Public ownership, Nationalization Pages: 11 (3095 words) Published: October 17, 2014


Privatisation can be defined as ‘the partial or total transfer of property of responsibility from the public sector (government) to the private sector (business) or private persons. Privatization can include the transfer of responsibilities and not solely change of ownership. Privatisation consists of simply ‘the transfer of all or any of three kinds of property rights from the state to the private sector; ownership rights, operating rights and development rights since these constitute the most common type of privatisation. In general privatisation has been undertaken as one of the reform measures to reduce government role in the economy and broaden the role of the private sector. Privatization can also be said to be a process of asset divesture. It is seldom asked, what does privatization seeks to accomplish in the Caribbean? It must be understood that privatization is seen as an instrument working towards supply side improvement by the promotion and allocation of more efficient resources and short term stabilization through expenditure reduction. Privatization initiatives are now a current occurrence in most Caribbean countries such as Belize, Jamaica, and Trinidad & Guyana to name a few. It has shown that most privatization activities took place in Latin America & the Caribbean; between the period 1988 and 1993 this region accounted for more than half the total privatizations in the Third World. Most privatization initiatives take place in the utility companies of the Caribbean. In case of Belize (electricity, water, port authority and the sugar cane factory). Government in many of these Lesser Developed Countries embraces privatization as an attachment to the World Bank and the International Monetary Fund. These institutions stress and maintain that privatization is the main driving force towards economic liberalization and self-sustained growth. The objectives of Privatisation can happen either directly or indirectly. The main objective of privatization is placing emphasis on improving the efficiency of government owned/ semi-owned establishments, whether retained or divested. Some objectives are to Improve the operational efficiency of enterprises that are currently owned or semi owned by government, and their contribution to the national economy in terms of reliability of delivery, quality and price; introduce competition in areas under monopoly; Reduce the burden of semi/owned government enterprises on the Government budget (direct) an example is stated in the re- privatization of Air Jamaica by the Government. (The Government of Jamaica initiated re-privatization process due to the airline’s increasing financial losses and the restructuring needed to face the challenges of new market conditions. The privatization of the airline was a top priority and engaged the International Finance Corporation as its Lead Advisor)(The KED Group Research); raise revenue opposing to increase taxes on citizens (direct);Expand the private sector’s role in the economy, permitting the Government to concentrate more on its public resources and roles; Encourage wider public population in the ownership and management of business; encourage industrial growth; attract foreign investments Some other objectives can be classifies as secondary objectives such as creating a more market-oriented economy; to gain access to the foreign markets and technology while promoting the development of the capital market; and preserving self-reliance. There are said to be three major areas which privatization is expected to impact. Firstly there’s Efficiency, secondly there’s reduction of financial burden of the government and thirdly the ability to enhance private sector growth and activity to promote economic democracy through the participation of national assets ownership. In the Caribbean, privatization is expected to have a positive impact on productive efficiency. This is a result of the in-efficiencies that have plagued the...
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