Privatization
Privatization concept
Privatization in economic expression is the transfer of public ownership or the assignment of its management to the private sector.
Transferring the ownership of public sector commercial establishments to private companies or selling state-owned shares in some public shareholding companies, wholly or partially, to the private sector.
Privatization is done by:
Selling state-owned assets to the private sector.
The state's abandonment of providing services that it previously carried out for the benefit of the private sector.
Reasons for the emergence of privatization
Increasing State Intervention Problems:
The state's interference in economic life has led to the emergence of many problems, the most important of which are:
An increase in companies and governmental institutions that provide goods and services, and consequently an increase in the bureaucracy of governmental organizations, especially with the large number of laws that they enact to conduct their work.
Increasing unemployment, especially underemployment.
Weak competition eventually leads to the consumer bearing the burden of increased cost.
The success of the capitalist system and the failure of the socialist system:
The comparison between the capitalist system which is based on private ownership, individual freedom and consumer sovereignty, and the socialist system which is based on public ownership, the comparison is in favor of the capitalist, socialist, socialist system. While the individual lives in the socialist system in a deteriorating situation, his income level is low and he does not enjoy any measure of economic freedom, which makes the differentiation in the interest of private ownership, market economy and the principle of sovereignty.
Develop the concept of state borders:
Thanks to technological progress and the communications revolution, the world has now become a single village, which has led to higher freedom of movement of goods, services and capital from one country to another, and increased attention to the standard of living, health, health, and legal standards. It is noted that the more the state interferes in economic life, the more it affects individual freedom, freedom of trade, and the freedoms emanating from it, such as economic, cultural and social...
Increasing the state’s general budget deficit:
The increase in the state's interference in the economic life has led to the inability of public resources to meet the costs, so the government cannot meet this deficit, especially in the developing countries, except by imposing new taxes or an increase in the interest rates that have led to excise taxes. As for resorting to borrowing, whether it is an internal or external loan, it constitutes a burden on the state's general budget, as the loan entails paying the installments and interests due. To remedy this deficit, the state seeks privatization.
Relying on the private sector to achieve the public benefit:
Public goods and services are those that are satisfied by the state. They are non-competitive goods and services, and they are goods for which the forces of supply and demand fail to set a price, and consequently, they are saturated by the state. With the increase in the growth rate in many countries, the private sector became able to satisfy some semi-public or social goods and services such as private schools, universities, hospitals and housing, which helped in its spread.
Strengthening and developing the infrastructure:
The developing countries suffer from a shortage of infrastructure projects such as roads, bridges, banks and electric power, and these projects require large capital and returns in return are low in the long run.
All of this leads to a diminishing role of the state and an expansion of privatization.
Economic Objectives:
Increase and improve productivity
Work to redefine the state's role in productive activities.
Reducing financial burdens and reducing debt.
Contribute to increasing the volume of development projects.
Increase the base and size of private property.
Social goals:
Achieving public welfare by increasing the volume of economic growth, increasing the volume of projects, increasing the volume of employment and improving the level of income to provide a decent life for people.
Work to redistribute income and achieve social justice in terms of reducing disparities between different groups of society.
The benefits of privatization
Political: Emphasis on the freedom of the individual in carrying out his economic, administrative and social activities, and the government's desire to improve the standard of living of individuals.
Financially: It reduces dependence on external financial sources, and provides a surplus in the state treasury, which reduces the budget deficit.
Administratively: Reducing the administrative burden on the state and finding a solution to social dependency, by choosing well the working individuals and working to develop their skills to achieve competition.
Productivity Development: A tool for improving the productivity of organizations with performance and profitability problems
Improving the efficiency of institutions: a means of increasing production or service in return for a reduction in cost.
Creating competitiveness: Creating a competitive climate that is reflected in the quality and quality of service provided by the private sector by reducing legal, administrative and supervisory restrictions on economic and investment activities.
Openness to the outside world: Openness means reducing restrictions, creating an active financial market, reducing red tape, reducing bureaucracy and retraining.
Types of Privatization:
Total privatization:
Which means transferring all ownership from the public sector to the private sector completely, and from here it is not entitled to interfere in it financially or administratively except through the constitution and the laws of the state to run the institutions and activities in the state.
Partial Privatization:
This means the transfer of ownership from the public sector to the private sector, but in part, and here the public sector becomes a partner to the private sector, and management remains within the powers of the public sector, especially in institutions that concern the state and the people, which means the organization of sectors.
Conditional Privatization:
It means the transfer of ownership from the public sector to the private sector on a condition that is agreed upon by the two parties, and through which the right of the two parties in financial and administrative matters is guaranteed by imposing some conditions, which means administrative transfer.
Methods of implementing privatization
Administration.
leasing
.
privilege.
Selling to the private sector:
Bidding
Selling through auction.
Selling through the capital market.
Establishment of semi-governmental companies.
Debt swap.
Return the ownership of public sector companies to the private sector.
Establishment of public joint-stock companies.
filter method.
Conditions for the success of privatization
Provides the political will capable of clearly defining the dimensions and areas of the privatization process.
Develop effective and clear privatization programs and plans characterized by objectivity and impartiality.
Working on a comprehensive restructuring of commercial activities in order to achieve a real competitive level.
The necessity of working to achieve economic stability by maintaining the purchasing value of the currency.
Work on preparing a legal, regulatory and supervisory mechanism to ensure the safety and health of the competitive market.