privtatization _02
TRANSCRIPT
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What is
Public Enterprise?
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Legal Definition: The most common definition (legal) is
to suggest that the PUBLIC Corporationis an organization that the governmentowns.
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Functional Definition:The criteria used is the following :
a majority of its ownership must be vested in
government management of its affairs must be relatively
independent from government
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Characteristics of publicC
orporations Engage in business transactions.
Has a legal identity.
Limited liability.
Can initiate or be the object of legalaction.
Semi-independent board of directors. One shareholder (the government).
Management structure similar to privatesector.
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Problems of Public Enterprise Proliferation of new corporations and
subsidiaries
Inefficiency of public corporations
Unfair competition with the private sector
Increasing financial power of publiccorporations
Problems of accountability Accountability to whom
Problems of mandate and reporting
Proposal for reform: privatization
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Privatization
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The transfer of public assets, operations oractivities to private enterprise.
Margaret Thatcher once remarked: The publiccontrols the private sector, but nobodycontrols the public sector.
Private firms need their customers in order to
survive state industries do not. Financed through taxation, state operations
are largely independent of consumer choices.
What is Privatization?
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What is Privatization? Undoing of public enterprise
Why Privatize?What are the economic & social market failures?
To reduce government involvement incommercially viable activities
Increase efficiency in the delivery of goods,and services
What is Privatization?
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Sell the whole operation by public share issue
First sell part (51%) of the operation bypublic share issue and the balance later
Sell all or parts of the operation to privatesector buyers
Sell the operation to the workforce Give the operation to the workforce
Contract out the service to the private sector
Main Methods ofPrivatization
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Liquidation: government sale of astate-owned firm to the private sector
Part Liquidation
Whole Liquidation
Subsidization: govt provision of grantsto non-profit organization for publicservice
Consumer groups, Environmental groups
Types of Privatization
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Franchising: to a private company
exclusively to provide a region with acertain service
Monopoly rights
Contracting out: govt retention of
responsibility but hiring a privatecontractor
Types of Privatization
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Ideology
Accountability Efficiency
Financing
Whats DrivingP
rivatization?
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Privatization
Benefits of Privatization:
Economic Benefits: One-time cash injection to get revenues Competitive imperative
Market capitalization
Social Benefits: Commercial control over enterprise (more
disclosure)
Private dividend more public money for goods,and services
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To Government:
Reduces the operating costs of government Raises proceeds to reduce the debt
Reduces future calls on governmentexpenditure
Turns losses into tax revenues
Reduces lobbying pressures on politicians
Advantages of Privatization
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To the Private Sector:
Stimulates development of privateenterprises
Helps create a competitive environmentwhich in turn increases efficiencies andreduces costs
Could provide a basis for an exportindustry
Advantages of Privatization
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Costs of Privatization:
Economic Costs: Loss of annual government revenue
Social Costs:
Loss ofguaranteedjobs
Loss of government influence in market outcomes(Public Interest)
Loss of government control over provision ofpublic goods and services
P
rivatization
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Privatization
Conclusions:
A policy conundrum In good public, benefits exceed costs In bad public, costs exceed benefits
Yet,
Only good public enterprise is easy to privatize but
these public enterprises are successful and thusproviding substantial economic and social benefits
Bad public enterprise is hard to sell yet incurringsignificant economic and social costs
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Privatization
Finally
Although the trend in the past ten years wasgoing toward privatization ,but now with the
current financial crisis we can hear a lot ofvoices asking for the governmental supervision
specially in the finance , real state ,and infra
structure industries.
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References
International Information Network (Internet)
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Privatization
Thank You !!
Work Group
Shireen Safwat
Mohamed Khalil Abdel-Hakam
Salah El-Sayed Abdel-Mottaleb
Hussein Abdel-Fattah