Mention the advantages and disadvantages of privatization.
Answers
The advantages of transferring government-owned assets to the private sector are increased efficiency and profits, largely because competition incentivizes innovation and improvement. The disadvantages of privatization are decreased regulation and government revenue. Institutions not owned by the government do not directly deliver the government revenue, and these institutions also have more freedom to pursue their own interests, which may negatively affect consumers, without government control.
Privatization helps society in many ways.
Fact that privatization and significant strategy of economic rejuvenation of even Communist Nations is testimony to economic role of privatization.
Advantages of Privatization :
1. Financial Resources
Primary benefit of privatization is giving financial resources for government for generating resources disinvestment of public sector enterprises.
2. Optimum Utilization of Resources
Its been observed that public sector has failed in optimal use of national resources.
Private sector can success in optimum use of resources by controlling efficiency.
3. Fostering Competition
Most public Enterprises enjoy status of monopoly.
It gives inefficiency and losses.
Privatization makes situation of competition for public Enterprises and forced to improve their efficiency.
4. Reduce Fiscal Burden
Privatization reduces fiscal burden of state by relieving it from losses of public enterprise and reducing size of bureaucracy.
5. Economic Democracy
Privatization helps controlling government Monopoly.
It helps attracting more resources from private sector.
It evolves economic democracy by private performance in Economics sphere.
Disadvantages of Privatization :
1. Problem of Price
Government generally wants selling least profitable Enterprises those that private sector isn't willing to buy at price acceptable to government.
2. Opposition from Employees
Disinvestment rises political objections from employees who will lose jobs from politicians who fears short-term unemployment due to liquidation of cost reduction by private owners from bureaucrats who stand losing patronage and from sections of public who fear national assets are being concerned by foreigners, rich or particular ethnic group.
3. Problem of Finance
Developing countries under developed capital market makes it difficult for government to float shares and for single buyers to finance large purchases.
4. Improper Working
Primary disadvantage of private sector is that its fallen short of what this sector is able or what its achieved in other countries.
Private sector isn't interested in cost reduction and quality increase.
5. Independence on Government
There is an excessive Regulation of private sector by government.
This prevented competition from becoming generalized phenomenon of economy.