The Role of Privatization in Improvement of Productivity in Public Sector

Topics: Economics, Public sector, Public company Pages: 13 (4575 words) Published: April 17, 2011
Name MARAQITA JONES
Course PSC 7110
Dr.James Kramer

The Role of Privatization in Improvement of Productivity in Public Sector

Abstract

Privatization is the art of transferring asset ownership from public to private hands. The emphasis plies in the ownership of physical assets. It is generally a once-and-for-all sale of a state –owned asset, in this case the government always retains no governance control and no operational risk, though usually retains the regulatory control over the assets. The rationale of the private sector hinges on the difference in incentives between the public and private sectors. Usually the objective of the private firm is to maximize profit, which is measured relatively and is tied to manager’s performance. On the other hand public-sector organizations, have a more complex set of objectives which involve the maximization of social welfare which are hard to measure. The Sections of the paper begins with a brief overview of privatization as well as providing examples of Privatization taking place around the world. The analyzation of the effects of privatization on economic growth in developing and under-developed countries. It also examines the relationship that exists between growth in the public sector and privatization from an incentives perspective. Then Finally useful conclusions regarding privatization as an economic growth policy.

Table of Contents
Introduction…………………………………………………………….4 Forms of privatization………………………………………………….5 Rationale behind privatization…………………………………………..5 Role of private sector and privatization in health systems……………....7 Impact of privatization in economic growth……………………………..7 Privatization and public development…………………………………....9 Importance of privatization………………………………………………10 Role of privatization in improvement of productivity in public sector….12 How to privatize…………………………………………………………..15 Conclusion……………………………………………………………….17

Role of Privatization in Improvement of Productivity in Public Sector Introduction
The role of the private sector is understood both in broader reform context and partly on how to contain costs and increase efficiency without compromising standards in order to achieve financially sustainable, high quality services in all the sectors of development. The debate on the role of the private sector and privatization and its balance with public sector can only move forward when ideologies and values can be oriented towards priorities and trade-offs between objectives rather than on the instruments to achieve them( Regional Committee for Europe 2003, p. 7) The roles privatization plays in improvement of productivity in Public Sector can not be overemphasized. This is more so with the advent of public policy reform programs which has been one of the most important features in the global world during the past few years (Shamsul, 1996). The governments of vary many world economies have in the past few years put in place in various measures of privatization as a form of improvement of productivity in Public Sectors. The implication here is that privatization is a practice which is widely accepted as a method of achieving economic growth in the public sector.

The rise of economic approaches in major world economies which centered on the state was a very strong indicator of the failures of the market mechanisms as well as the increasing demands for the rights of the citizens. Such rights include the rights to have the most basics of necessities such as good living standards, good quality affordable education, and adequate health care among others. Other such necessary services which constitute the rights of the citizens include social equities. It was established that in developing nations the public sector played a very significant role towards the acceleration of socioeconomic development of these developing nations (World Bank, 1994).

This practice is however beginning to diminish because of various reasons...

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