Disadvantages of privatization

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.