Advantages of Privatization

Advantages of Privatization

Advantages of privatization are Liberalization of economy, improved product & services, efficiency & productivity, more profitability, and more income for the Government, no political pressure on decision making, end of bailout packages.

1.    Liberalization of Economy

Liberalization of economy is one of the main advantages of privatization. Liberal economy would provide equal opportunity to all parties. Liberal economy would also promote the competition in the economy.

2.    Improved Product & Services

Privatization would improve the competition, and such competition will bring improved services & product to the society. Such competition would reduce the prices of products for the customer.

3.     Better Efficiency & Productivity

Other advantage of privatization is improved efficiency & productivity. It is important to note that organization running under government supervision & control normally has lower productivity for several reasons.

4.    More profits

Privatization of government owned organization will introduce the culture of profitability within organization. Most public organizations normally incur heavy losses, because government objective is not profit maximization.

5.    Income for Government

Privatization would also improve the government income, because the losses making companies are not paying taxes on the profits. Government can utilize this increased income on public welfare projects.

6.    No Political Influence

Privatization will introduce the culture of professionalism within organization and now decision shall be made on business logic without any political influence & pressure.

7.    Finish Bail Out Packages

Public organizations need bailout packages every now and then to finance their heavy lose. With the help of privatization, these packages can be eliminated, and government funds can be utilized more effective way.

8.    Innovations & Advanced Technology

Privatization may bring advanced technology to the public organization. Businessman or investor is more interested to use new methods of productions to improve productivity.

Disadvantages of Privatization

Disadvantages of Privatization

Disadvantages of privatization are creation of monopoly, failure to manage the organization, decline in quality of service, unemployment, misuse of disposal receipt and purchase of future sale. These disadvantages has been explained below

1.    Creation of Monopoly

Privatization may result in creation of monopoly in the economy; monopoly is created where major competitor buys the public organization. Monopoly is not in the best interest of the people for many reasons. (Monopoly earn abnormal profits)

2.    Failed to Manage

New management may not be able to run the large organization, it is noted that public organization normally are very large, because those organization are created for a larger group of people. Therefore, it is not easy to run such organization with limited skills.

3.    Decline in Quality of Service

Privatization may result in decline of quality of service, because businessman or investor is more interested in profit than quality, where government is more interested in quality than profits.

4.    Unemployment

Other disadvantage of privatization is unemployment, because new investor would be interested to run with minimum labour source, where public organization normally over staffed, therefore some staff may lose their jobs.

5.    Misuse of Disposal of Receipt

One of the main disadvantages of privatization is to use the receipt of disposal in non productive projects.

6.    Purchase for future Sale

Privatization should not be future sale, but for improvement of services and competitive environment. It means that buyer should not sell the shares in stock exchange at higher prices by manipulating profit and earn easy profit.