Privatization

Privatization means the transfer of business rights to the private sector from the public sector. It also means the nongovernmental intervention in the buy or sell of the public corporations’ shares. In many countries, privatization has been started as a step to economic reform.

Methods of Privatization:

Privatization methods are of three types. These are:

• Voucher Privatization: It is a privatization method through which shares of ownership are allocated to the people at a low cost. Countries like Russia, Slovakia, Poland have applied this method of privatization.
• Share Issue Privatization: By this method shares are sold in the stock market. It is the most common method of privatization.
• Asset Sale Privatization: By this process the entire firm or part of the firm is sold to an investor usually through an auction.

Privatization and Economic Reform:

In many developing countries the government failed to manage large manufacturing and commercial enterprises and also to improve their efficiency and competitiveness. Therefore the economic growth of those countries became fragile. So as a strategy of the economic reform process those countries started privatization.

In the eastern European countries, for example Russia, the people are enticed by the government to buy the shares of medium and large scale state enterprises that have been marked for privatization. For the remaining state enterprises, the privatization process proceeds with the issue of shares of that enterprise and an Initial Public Offer (IPO) for the those shares have been given by the government.

Electric and gas industries are privatized in many countries. Some Asian countries privatize their sea ports. Countries like Britain have further advanced the privatization program in the airport and water supply sectors. Russia has privatized many of its state enterprises in the rural as well as in the urban areas. Privatization is now a worldwide strategy for economic development.