What is Privatization?
The term privatization refers to the process, which involves the transfer of ownership, control, or management of a business, enterprise, or public service from the government or the public sector to private ownership or control. In other words, it involves selling the assets held by the government to the investors or to a private corporation. For example, the government can just sell a public company, utility, or even infrastructure to some interested private parties. Privatization is aimed at ensuring greater efficiency and competitiveness, reducing the level of government’s involvement in the economy, and increasing its revenues.
Features of Privatization:
- Transfer of Ownership: The process of privatization entails giving private organizations or individuals ownership and management of state-owned businesses.
- Market Competition: By permitting private businesses to enter formerly monopolized industries, it seeks to create market competition and promote efficiency and innovation.
- Capital Infusion: Private investors frequently provide capital once a company is privatized, which can enhance the company’s performance and financial standing.
Difference between Privatization and Disinvestment
Privatization and disinvestment are two separate strategies used by governments to redefine their relationship with state-owned activity. Privatization represents the process during which a government occupies the position of a stakeholder and sells or transfers this ownership to private individuals or firms, while Disinvestment, can be viewed as a situation when a governmental unit of a specific country sells all or part of its stake in state-owned enterprises or activity.