Advantages And Disadvantages Of Privatization

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Privatization refers to the transfer of business, property or ownership of the government to the private sector. The government will not own the entity or the production anymore. By Kosar (2006), it is a shift of the function from the state to the private sector. Privatization is often used to increase the revenue of the government, it is a common economic tool. (Addams, 2006). According to Poon (2004), privatization can be divided into four categories which is sales arrangement: meaning of transferring ownership of the government to the private enterprises, contracting arrangement: it involves transfer of service productions from the in-house government to the private contractors, deregulation: reducing the state regulation by market entry restrictions to increase market competition, user pay: it assumes people are rational and separate individuals who aim to earn profit in everyday lives. These are some definitions…show more content…
The privatization of some government-owned monopolies often occur deregulation, meaning they will use some policies that can allow more companies of business enter the industry and increase market competition. (Pettinger, 2017). With increased market competition, shops tend to decrease their prices so that they can fight for more customers. It also encourage more development on products, so more new goods can be produced and consumers can have more product choices. Owners also provide higher quality services in order to keep their old customers and attract more new customers. (Lau, 2014). They will also increase their productivity under a more competitive market, they can respond faster to market changes and make better and more flexible market decisions. When developing the economy, it promotes the private enterprises, increases financial flexibility and helps with the expansion of the private sector. (Li, 2012). This leads to an overall better economic
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