The Role of Privatization in Improvement of Productivity in Public Sector

4588 WordsMay 1, 201119 Pages
Name MARAQITA JONES Course PSC 7110 Dr.James Kramer The Role of Privatization in Improvement of Productivity in Public Sector Abstract Privatization is the art of transferring asset ownership from public to private hands. The emphasis plies in the ownership of physical assets. It is generally a once-and-for-all sale of a state –owned asset, in this case the government always retains no governance control and no operational risk, though usually retains the regulatory control over the assets. The rationale of the private sector hinges on the difference in incentives between the public and private sectors. Usually the objective of the private firm is to maximize profit, which is measured relatively and is tied to manager’s performance. On…show more content…
At the same time there has been an increased loss of public confidence in institutions of government especially in providing public goods and services. A combination of these factor as well as others have been the driving forces towards the issue of privatization. Forms of privatization Privatization can usually take several forms. These include divestiture which has equally been described as the transfer of ownership of public property in the hands of then private sector. The other form of privatization is sale of shares through the stock market as well as transferring management of public property to the private sector without necessarily changing ownership of the same (World Bank, 1994). Other methods include the introduction of contracts such as production contracts while still maintaining other contracts like procurements. Other methods of achieving the same could entail sharing profits with the shareholders of the company, liquidation, as well as the reduction of too much bureaucracy in the management of the public corporations. Rationale behind privatization In many governments, privatizations have been carried out for many reasons. One major reason that has been given for the support of the role privatization plays in improvement of productivity in Public Sector has been the fact that it is a way of increasing the efficiency of the economy, streamlines the public sector as well as acting as a way of scaling
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