Privatization that has gathered momentum since around the 1980’s has become the hallmark of the new wave of economic reforms sweeping across the world. It refers to the transfer of ownership or management of an enterprise from the hands of the public sector to private sector. It also means the withdrawal of the state from an industry or sector, partially or fully. Privatization marks a change from dogmatism to pragmatism and amounts to a reversal of policy. It is evident that the economic growth rate has multiplied ever since privatization has come into existence.
What is Privatization?
1. The transfer of ownership of property or businesses from a government to a privately owned entity.
2. The transition from a publicly traded and owned company to a company which is privately owned and no longer trades publicly on a stock exchange.
The performance of state owned enterprises in many countries have, by and large been far from satisfactory. This may be attributed to the prevalence of bureaucracy and red tapism in most of the public sector administration. They have often put large burdens on public budgets and external debt. Economic inefficiencies in the production activities with high costs of production, inability to innovate and costly delays in delivery of the goods produced are some of the shortcomings of the public sector. There is also ineffectiveness in the provision of goods and services such as failure to meet intended objectives, diversion of benefits to elite groups, and political interference in the management of enterprises. The relationship between the management and the labor unions is strained owing to the expansion of bureaucracy.
These problems have led many governments to undertake programmes of public sector reform. One Such reform is privatization of publicly managed activities to discard the inefficiencies and improve the economic growth rate. For privatization to succeed: