To put it very briefly, the main reason privatization can help an economy grow faster is that almost all state-owned enterprises operate at low levels of productivity, which means that they’re using more resources than necessary to produce what they produce.
Privatization creates pressure for the privatized enterprise to operate more productively, and allows those excess resources to be used elsewhere in the economy, which raises overall output.
Once the transition has been completed, the economy will have grown from the initial position. Moreover, once those firms have privatized, they will tend to work much harder to improve their productivity over time, thus providing an ongoing source of added growth.
The main reason state-owned enterprises are so unproductive is that they're almost always protected from competition, privatization is the most powerful source of pressure to improve productivity.
As long as every producer faces a healthy degree of competition, each producer is going to make continuing efforts to reduce its costs of production, so that it can increase profits.
If every producer is doing that, at least one of them is going to try to increase its share of the market by cutting its prices, and when that happens all the other producers are going to be forced to do so as well.
That means that lower costs of production get passed on to consumer in the form of lower prices.
Depending on the product or service in question, those firms may also make efforts to improve the quality of their products, develop new products better-suited to consumers’ needs, and so on.
The net effect of that competitive pressure is that producers work hard to keep finding ways to produce more and better output with less input of labor and other factors of production.
If the economy is growing quickly, those firms may increase the number of workers they hire. If it’s not, some of those workers may need to find jobs in another firm or another industry.
But as long as labor markets are reasonably flexible, those workers will soon be helping to produce other goods and services.
In short, competition helps ensure that the economy as a whole is producing as much as it can with the available resources, and that productivity is growing over time.
That’s not all that’s required for an economy to grow, but it’s an important part.
The assumption behind the privatization decision is that there are perceived and real shortcomings associated with doing economic development within a state government bureaucracy that can be overcome by shifting some functions and responsibilities to a public-private partnership structure.
When it can be demonstrated that a public private partnership structure is likely to achieve some of the aforementioned goals or produce better results than a state agency, the decision to privatize certain state economic development activities can be a smart one.
If structured well, a public private partnership can accelerate and strengthen a state’s economic development efforts by bringing together the “best of both worlds” from the public and private sectors in ways that elevate the level of play and performance across the board.
In Nigeria, the problems associated with public enterprise were improper management, waste of resources and the feeling that what belongs to the government belongs to nobody.
It comes obvious there after that government could no longer continue to support the monumental waste and inefficiencies of the public enterprises.
It is clear therefore, that the reason behind the inefficiencies of the public enterprises shows in a notion that “when the government owns, nobody owns and when nobody owns, nobody cares.”
All these inefficiencies did not allow the public enterprises to grow and as such, they have been operating at a loss which is always charged against the public treasury.
Most companies start as private companies funded by a small group of investors. As they grow in size, they often access the equity market for financing or ownership transfer through the sale of shares.
The first offering, called an initial public offering (IPO), signifies the transition of a private company into a publicly-traded company.
In some cases, the process of becoming a publicly-traded company is subsequently reversed through the process of privatization.
This occurs when a group of investors, or a private company , purchases all of the shares in a public company that is looking to become private.
Once the purchase is complete, the company can be deemed private by officially removing itself from the stock market and eliminating the option for the public trading of the associated stocks.
they say dat privatilization is the transfer of ownership or idustry fyom public sector to private sector.
Privatization is the process of transferring an enterprise or industry from the public sector to the private sector.
The public sector is the part of the economic system that is run by government agencies.
Privatization may involve either sale of government-held assets or removal of restrictions preventing private individuals and businesses from participating in a given industry.
Privatization is an ongoing trend in many parts of the developed and developing world.
Proponents of privatization maintain that the competition in the private sector fosters more efficient practices, which eventually yield better service and products, lower prices and less corruption.
On the other hand, critics of privatization argue that some services such as health care, utilities, education and law enforcement should be in the public sector to enable greater control and ensure more equitable access.
The term has alternate meanings within business and finances. For example, if an individual or organization purchases all the stock in a publicly-traded company, that effectively makes it private, so that process is sometimes described as privatization.
However, in contrast to the primary understanding of privatization, the company in question is in the private sector to begin with and remains there.
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