Question

Generally Privatization of Enterprises is enabled by Public Sector Law. If the exercise was mismanaged what type/branch of laws can be used to provide redress and remedies and what could be the defenses available to answer to the allegations of mismanagement?

Answer 1

Privatization occurs when a government owned business operations or property becomes owned by a private non government party. The process in which publically traded company is taken over by a few people is called privatization.

Privatization is expected by many to promote competition and eliminate corruption. Sometimes converse has been true as privatization beneficiaries have successfully engaged in new types of corruptions to maximize their own gains.

There are some disadvantages in privatization.

· Natural Monopoly

· Public interest

· Short termism of firm

To ensure public acceptability, some benefits accrue to many in the early stages of privatization in order to minimize public resistance. Governments lose vital revenue sources due to privatization if State Owned Enterprises (SOE’s) are profitable and are often obliged to subsidize privatized monopolies to ensure the poor and underserved still have access to the privatized utilities or services.

Privatization burdens the public when charges or fees are not reduced, or when the services provided are significantly reduced. Thus, privatization often burdens the public in different ways, depending on how market power is exercised or abused. Th most profitable and potentially profitable are typically the first and most likely to be privatized. This leaves the rest of the public sector even less profitable and thus considered more inefficient inturn justifying further privatizations.

It is often argued that privatization is needed as the government is inherently disorganized and does not know how to run enterprises well. Incredibly, the government is expected to finance privatized SOEs, which are presumed to be more efficient, in order to fulfill its obligations to the public.