modern approach of privatizationPrivatisation 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. 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 liberalization, 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.
In view of the above, it
is evident that perspectives 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. Maximizing the number of shareholders may be achieved by under pricing of
share, which is in conflict with the aim to maximize the treasury income
following the rules and perspectives of private sector phenomena.