The following are the Major advantages of privatization.
1. Liberal Economy
The privatization is really helpful to promote the concept
of liberal economy in the country and provide equal opportunity to every
organization working in the country. This will promote the open competition in
the market and customer will be benefited from the open competition both in
terms of quality and prices.
2. Improve the
efficiency and productivity
The privatization is normally resulting in efficiency and
productivity. The organization run under the govt controlled has low
productivity and efficiency as the main objective of a public organization is
not to earn profit but provide either quality services or quality product. The
Govt is less concerned about profit of company.
3. Improve
profitability
The most of the public organization is incurring heavy
losses. The private sector buy the organization with the objective to earn
profit and the buyer introduce such procedure which ensure the sustain profitability.
The improve profit will raise the salary level of employee and employee may
also be entitled to get bonus and other benefits.
4. Free organization
from political pressure
The privatization of the entity frees it from the political
pressure and political interference. The political objective is different from
the commercial objective. Therefore the entity is on track to achieve the
commercial objectives. The now business are not run by the political influence
manager but competent and professional manager who will produce the commercial
results.
5. Tax collection
The public run entity normally sustain heavy loses but after
coming in the control of private sector it becomes a profitable entity and
start paying taxes on the profit. So this improves a a gap between revenue and
expenditure.
6. Receipt from sale
The privatization produces a huge receipt from the sale.
This receipt can be used in many ways but one of the important usages may be to
pay the debt so that the debt serving amount will be reduced and the funds may
be allocated to development project.
6. No Bailout
packages
After privatization there is no need to announce a huge
bailout packages for the public entity and now these funds may be allocated for
development projects or for social up left of the society. The organization is
no more burdens on national economy but a contributor to national economy in
many ways.
7. Govt can focus on
his original work
The govt basic function is to govern and facilitate and
provide a basic infrastructure to private sector for investment. The Govt can
focus on its basic function. The Govt is there to govern the country and
provide the security to the investor and not to run the businesses.
8. Introduction of
new technology
The privatization will introduce the new technology and
efficient process to the entity. The new product with improved features will be
launched. The private sector will install new capacity to the organization and
introduce more investment in the entity.
Disadvantages
of privatization
1. Private Monopolies: - Govt organization
is very large in operation and difficult to compete with. Therefore there is a
chance that a public monopoly may be converted into private monopoly.
2. Fail to Run the Organization: -
The public scale organizations are not easy to run sometime the purchasing
entity does not have the required capacity to manage such a huge organization.
The ultimate result is shut down of the entity which is not in the interest of
employee neither good in public interest.
3. Create Unemployment: - The
Govt owned organization has a large number of employees. The buying entity may
be interested in more efficient operations. Therefore there is a chance of increase
unemployment rate in the economy.
4. Low Quality of Service: - The
Govt is more interested in quality of the service where the private
organization is more interested in more profit. Therefore, there is a chance of
low level of service.
5. Utilization
of receipt on non development Expenditure:- The receipt from the sale
public company may be utilized for the non development purposes.
6. Not
purchases for the purpose of further sale on profit:- The govt must ensure
that purchasing party must run the the entity for a reasonable time and does
not sale the business on profit. The Govt should also look a close eye on the
share value of the entity for reasonable time. There is fair chance to
manipulate with share price of entity to sell the shares at higher prices in
the market.
Methods of privatization
1.
Inviting bids from the private Sector:
2.
Selling Share in the Stock market to the General
public
3.
Sales to employee working Group
4.
Appoint a Manager from the mutual fund to
operate the entity
5.
Contract with mutual fund to arrange fund for
purchase.
