Docstoc

Privatization

Document Sample
Privatization Powered By Docstoc
					Privatization




                          PRIVATIZATION

A
         very broad term but most simply, privatization is the transfer of asset or services delivery
        from the government to the private sector. Privatization runs a very broad range,
        sometimes leaving very little government involvement, and other times creating
partnerships between government and private service providers where government is still the
dominant player.

As Government Executives put it,

             Merely defining “privatization” is difficult. In its purest form, the term refers to the
       shifting of the production of a good or a provision of a service from the government to the
       private sector, often by selling government-owned assets. Clinton Administration officials
       took this rather narrow view. “When we talk about privatization, we don’t mean
       contracting out.” Said Elaine Kamarck, who headed Gore’s National performance Review.
       “We mean purely divesting the government function.”

            Most definitions of privatization, though, are more expansive, covering virtually any
       action that involves exposing the operations of to government to the pressures of the
       commercial marketplace. That would include everything from contracting out janitorial
       services at a federal building to selling off the Naval Petroleum Reserve.

            The broader definition of the privatization also includes a wide range of public-
       private partnerships, such as voucher system. Even the creation of federal corporations,
       quasi government organizations and government-sponsored enterprises is often filled under
       the general category of privatization. In such organizations, though, it is often difficult to
       tell where government ends and the private sector beings.




                                                                                                        1
Privatization



                Why We Do PRIVATIZATION?
In the answer of the question “why we do privatization?” We have certain objectives in our mind.
Here is a brief description of some of the objectives.

(1) For Improving The Efficiency:
For Improving the Efficiency of the national economy and enhancing its competitive ability to
meet the challenges of regional and international competition. The Economic efficiency of the
economy can be strengthened by subjecting projects to market forces. Enhancing competitiveness
is closely linked to the general strategy of developing the private sector in Pakistan. Important
measures taken so far to create a favorable climate for investment, such as developing the capital
and labor markets will help achieve this objective.

(2) Encouraging private sector investment:
Encouraging private sector investment and effective participation in the national economy, and
increasing its share of domestic production to achieve growth in the national economy. Mature and
strong private sectors participation is essential for Pakistan, as the private sector is able to develop
comparative advantage and provides a better opportunity for diversifying the economic base away
from the dependence on agriculture. The private sector can direct efficiently capital investments
towards more lucrative and commercially sustainable sectors.

(3)Enlarging the ownership of productive assets:
Privatization can be effective means to expand the participation of Pakistani citizens in the
ownership of productive assets in public enterprises and projects, by using the method of
public subscription in the privatization, which is considered the most important privatization
method to develop the domestic capital market.

(4) Encourage domestic and foreign capital to invest locally:
Privatization reflects the government s commitment to economic reform and a positive image
to attract foreign investments. Privatization also helps develop the capital market, create new
mechanisms for mobilizing capital and attracting notional capital outside the country, in
addition to attracting foreign capital and domestic savings of residents in the Kingdom.

(5) Increasing employment opportunities:
Increasing employment opportunities optimizing the use of the national work force, and
ensuring the continued equitable increase of individual income. The privatization of certain
projects may reveal that the number of employees exceed the number actually needed. In most
cases employees can be retrained or their skills can be upgraded.

(6) Providing Services To Citizens:
Provide services to citizens and investors in a timely and cost-efficient manner. Privatization,
particularly of investments that have monopolistic concession rights, may lead to increased




                                                                                                       2
Privatization

prices and a reduction in the quality of services, because some enterprises (services) receive
government subsidies prior to being privatized.

(7) Rationalizing public expenditure and reducing the burden:
Rationalizing public expenditure and reducing the burden on the government budget by giving
the private sector opportunities to finance, operate, and maintain certain services that it is able
to provide. The government budget is expected to benefit from reduced allocations for
operating expenditures as a result of the privatization of public enterprises or from transferring
the management of public utilities to the private sector through contracts for management,
leasing, or contracts for construction, and operation by the private sector.

(8)Increasing government revenues:
Increasing government revenues from returns on participation in activities to be transferred to
the private sector, and from financing compensation obtained, for example, from granting
concessions and from the proceeds of the sale of part of government shares. The government
aims at achieving positive financial results from privatization, either from proceeds from the
sale of an entire public project or participation in the profits and obtaining the proceeds of the
sale of part of its ownership of the project.

 (9) Financial:
 The release of the state from the problems of running state-hungry and often loss-making
business, raising funds for economic regeneration and/or to pay off debt, attraction of the
national and international capital into the economy, reduced reliance on imports.

(10) To Reduce Corruption:
Last, but not least, privatization is seen as a way to reduce corruption. The experience in many
countries, including Pakistan, is that public ownership of businesses provides many
opportunities for corruption. Allocating public funds to unfairly benefit an individual or firm is
typically the costliest form of corruption.

(11) Skillful Management:
The introduction of more professional management skills and techniques, creation of an
entrepreneurial and risk taking business culture, and better motivations and incentives
provision for management and staff.
(12) Political Objective:
The introduction of the market system as a means of aligning supply of resources with the
public demand for them, the spread of stake holding as a means of creating a result-based
orientation, integration of the economy into world markets.

Other objectives could be:
    Creating a liberal economic environment
    Removing trade and tariff barriers
    Improving national productivity
    Achieving rapid industrialization
    Improving efficiency and profitability
    Isolating the economy from political interference
    Developing available capital market


                                                                                                      3
Privatization



   ARGUMENTS IN FAVOUR AND AGAINST
Is privatization is beneficial or not? In the answer to this particular question there are some
arguments of different expertise, some of them are in favour and some are against of this
privatization process. Here we will discuss some of the most important points both in favour and
against.

                             Arguments in Favour
Advocates of privatization argue that governments run businesses poorly for the following reasons:

    Performance:
   The government may only be interested in improving a company in cases when the
   performance of the company becomes politically sensitive.

    Improvements:
    Conversely, the government may put off improvements due to political sensitivity - even in
   cases of companies that are run well.

    Corruption:
    The company may become prone to; company employees may be selected for political reasons
   rather than business ones.

    Goals:
   The government may seek to run a company for social goals rather than business ones (this is
   conversely seen as a negative effect by critics of privatization).

    Capital:
    It is claimed by supporters of privatization, that privately held companies can more easily raise
   capital in the financial markets than publicly-owned ones.

    Unprofitable companies survive:
    Governments may "bail out" poorly run businesses with money when, economically, it may be
   better to let the business fold.

    Unprofitable units survive:
    Parts of a business which persistently lose money are more likely to be shut down in a private
   business.

    Political influence:
    Nationalized industries can be prone to interference from & for &or reasons. Such as, for
   example, making an industry buy supplies from local producers, when that may be more
   expensive than buying from abroad, forcing an industry to freeze its prices/fares to satisfy the
   electorate or control increasing its staffing to reduce or moving its operations to it is argued


                                                                                                      4
Privatization



   that such measures can cause nationalized industries to become uneconomic and
   uncompetitive.

    Profiteering:
    Private companies can make a profit only by getting money from its clients. Proponents of
   privatization note that private corporations thus need to serve exactly the needs of their clients;
   and the more their clients are willing to pay, the better they serve the needs. Proponents also
   suggest that this means the corporations need to focus on even more marginal groups (who
   might not get their voice heard through the democratic system, yet still can pay for services).

                     Arguments Against Privatization
Opponents of privatization dispute the claims made by proponents of privatization, especially the
ones concerning the alleged lack of incentive for governments to ensure that the enterprises they
own are well run, on the basis of the idea that governments must answer to the people. It is argued
that a government which runs nationalized enterprises poorly will lose public support and votes,
while a government which runs those enterprises well will gain public support and votes. Thus,
democratic governments, under this argument, do have an incentive to maximize efficiency in
nationalized companies, due to the pressure of future elections.
Furthermore, opponents of privatization argue that it is undesirable to let private entrepreneurs
own public institutions for the following reasons:

    Profiteering:
    Private companies do not have any goal other than to maximize profit.

    Corruption:
    Buyers of public property have often, most notably in Russia, used insider positions to enrich
   themselves - and civil servants in the selling positions - grossly.

    No public accountability:
    The public does not have any control or oversight of private companies.

    Cuts in essential services:
    If a government-owned company providing an essential service (such as water supply) to all
   citizens is privatized, its new owner(s) could stop providing this service to those who are too
   poor to pay, or to regions where this service is unprofitable.

    Inefficiency:
    A centralized enterprise is generally more cost effective than multiple smaller ones. Therefore
   splitting up a public company into smaller private chunks will reduce efficiency.

    Natural monopolies:
    Privatization will not result in true competition if exists.



                                                                                                     5
Privatization



    Concentration of wealth:
    Profits from successful enterprises end up in private pockets instead of being available for the
   common good.

    Insecurity:
    Nationalized industries are usually guaranteed against bankruptcy by the state. They can
   therefore borrow money at a lower interest rate to reflect the lower risk of loan default to the
   lender. This does not apply to private industries.

    Downsizing:
    In cases where public services or utilities are privatized, this can create a conflict of interest
   between profit and maintaining a sufficient service. A private company may be tempted to cut
   back on maintenance or staff training etc, to maximize profits.

    Waste of risk capital:
    Public services are per definition low-risk ventures that don't need scarce risk capital that is
   needed better elsewhere.

    Not all good things are profitable:
   A public service may provide public goods that, while important, are of little market value,
   such as the cultural goods produced by public television and radio.




                PROBLEMS OF PRIVATIZATION
(1) Not Social But Economical:
Problems with Pakistan’s privatization drive. The philosophy of privatization stems from the role
of state in economic life. The thinking of the international financial institutions and free market
economists is that, as in USA and now in Pakistan, the state should confine itself to regulation only
and the operation and ownership of industrial enterprises and utilities should be left to the private
sector.

(2) Without Justification:
The famous saying of a former prime minister that “the government is not in the business of
business,” was the battle cry for the sale of some of the finest state owned enterprises regardless of
the fact whether these were making profit or losses.

(3) More Dependence on Private sector:
Privatization in Pakistan is seen as the strategy that will correct all past wrongs of the public
sector. But two questions arise: is the wholesale privatization that we have embarked upon good
for the country in the long run and whether there is a role for public sector enterprises in the
Pakistan of tomorrow.



                                                                                                         6
Privatization



(4) No Rapid Industrialization:
There is an opposite view to that which prevails in the decision making circles of Islamabad which
argues that in those states which started late in the race of development, like Pakistan, the public
sector has to play a vital role in accelerating the pace of economic growth. As is in developing
countries, the private sector is shy, inexperienced and not equipped to embark on rapid
industrialization. This is where the larger public sector enterprises come in.

(5) No Best Effect Of Employees Efficiency:
 The second main thrust for privatization is the belief that private sector units are more efficient
than public sector units. This is not true across the board. Studies from across the world show us
that when a comparison is made between public industrial enterprises and private firms producing
similar goods, changing the ownership of industry from public to private is neither a necessary nor
a sufficient condition for more efficient operation of specific industrial enterprises.

(6) Adverse Impact On the Budget:
Another issue with privatization is its fiscal impact. The favourable fiscal impact of privatization is
expected from the sale proceeds being used to retire national debt, as well as elimination of losses
of the public sector units as the losses were being financed from the budget. The opposite view is
that the public enterprises after nationalization in 1973 doubled the payment of their taxes as
compared to the pre-nationalization period.
Moreover, if the public sector enterprises are making profit and giving the government higher
return than the rate at which it is borrowing from the market, the privatization of profitable
enterprises would have an adverse impact on the budget.

(7) Unhealthy competition:
The fourth argument for privatization is to foster competition and to strengthen capital markets. If
all the units in certain sectors like cement are owned by the state and these are sold to different
parties, there would be healthy competition. However, if the market situation is such that there are
public sector units as well as private sector units for the same commodity there will be no further
fostering of competition by privatization. This is the case for Pakistan. In fact, what we are seeing
now is that cement producers are seen to be entering into a cartel like arrangement whereby they
have resisted government attempts to reduce cement prices.

(8) Weaken Capital markets:
The capital market is strengthened if the government share holdings are sold in the market.
However, these markets are not strengthened at all if one public sector unit is handed over to the
private party without some of its shares being offered to the public. This was the case in the initial
stages of the privatization process in Pakistan.

(9) Policies for Direct Foreign Investment:
Another objective of privatization is to encourage direct foreign investment. The direct foreign
investment in profitable public units is not likely to be beneficial for the economy, as against the
benefit of an initial purchase price, one has to calculate the recurring remittance of profit in foreign
exchange for years and decades to come. Direct foreign investment therefore should be attracted



                                                                                                         7
Privatization

by policy and design into new and risky ventures rather than through the purchase of profitable
enterprises.
In fact purchase of existing operational units by foreign buyers is not an addition to the capital
stock of the country.

(10) Patronage to The Government in Power:
At the same time, privatization gives tremendous patronage to the government        in power
which may be exercised to favour vested political interests rather than to serve long run national
objective, negating the basic objective of improving efficiency in the economy. This is something
that should be guarded against.

(11) Selling of Assets in Short-run:
Another imperative of privatization is sequencing and timing. It is essential that all the assets
should not be sold in a short period, because in the short period the buying power of private sector
may not be adequate to offer the correct prices for all the privatized assets. It may crowd out fresh
foreign investment and lead to reduction in the rate of investment in the economy. This is a real
problem in Pakistan.

(12) World’s Influence:
The Privatization Commission has so far sold public sector units and state assets worth
Rs. 135 billion, according to Minister for Privatization Dr Abdul Hafeez Shaikh. It seems
he is striving hard to achieve quick results under pressure from the World Bank, the Asian
Development Bank, and other international donors.

(13) Unemployment Problems:
Due to privatization problem of unemployment has increased. Because private companies are
wishing to have new management and therefore they are retiring the old employees of the
companies. They are also reducing the number of employees working in an organization.

 (14) Control of Big Capitalists:
Due to privatization the circulation of wealth has stopped. Only the big capitalists are earning
profit with that. Privatized companies are only concerned with the economic life not with the
social life of the people.




                                                                                                     8
Privatization


         PRIVATIZATION IN PAKISTAN
History
The Government introduced for the first time in the history of Pakistan the concept of privatization
in its 1988 Manifesto. In 1989, it legislated a framework for privatization, hired consultants and
undertook the first privatization by selling shares to PIA. However in 1993 the Peoples
Government inherited a Privatization Commission with inadequate technical and institutional
capacity for implementation of Privatization Agenda. There was lack of transparency and
perception of nepotism in the sale of industrial units. There were charges of favouritism in the sale
of Muslim Commercial Bank and cement plants.

 The Privatization Commission lacked credibility in the investor community and in the
international market .The privatization program of the Peoples Government was acclaimed by the
World Bank as one of the most organised and professional in the Asia Pacific region. The
Privatization Commission received funds from the World Bank for technical assistance and
upgrading of its professional capability in the privatization process. The Privatization Commission
was re-structured and qualified technical consultants were hired to improve the quality of work.

The Government took steps to protect those immediately affected by the privatization process,
namely:

1) Employees
2) Consumers

The Government has always considered the workers as the back bone of the economy. Employees
were allowed to match the highest bid in sales of industrial units. AC Wah one of the most modern
cement plants in Pakistan was given to the employees on that basis. The Government believes that
the employees must participate in this nation building program. There were numerous complaints
by the labour on non-payment of golden hand shake and VSS by the PML-N Government. In order
to ensure that the workers were protected, the Privatization Commission amended sale contracts so
that the benefit to the workers were guaranteed.

The employees of WAPDA had been vehemently opposing privatization. It was one of the major
success of the Peoples Government that they agreed to the Government's privatisation program for
power plants and distribution networks. A comprehensive package of incentives and protection for
WAPDA employees was agreed. This provided comfort to foreign investors and sent a message to
the world investment community that privatization policy of the Peoples Government has the
support of the workers of Pakistan.

The Peoples Government also established the regulatory framework to protect consumers. The
regulatory framework enables the Government to check monopolist practices as well as to monitor
prices. The laws provide adequate protection to consumers and a clear framework for operations to
the private sector.




                                                                                                    9
Privatization


      For the Telecommunication sector, the Pakistan Telecommunication Authority.
      For the power sector the National Electricity Power Regulating Authority.
      For the gas sector the Gas Regulatory Authority.

Establishment Of Privatization Commission:

Privatization efforts began in earnest after the creation of the Privatization Commission on January
22, 1991. Although the PC’s mandate was initially restricted to industrial transactions, by 1993 it
had expanded to also include power, oil and gas, transport (aviation, railways, ports and shipping),
telecommunications, and banking and insurance.

The Commission during three months period from July 2003 to October 4, 2003 has realized Rs.
533.149 million through sales of GOP shareholding in POL, ARL, DG Khan Cement and
10%shares of Kurram Chemicals. By October 4, 2003, the Government of Pakistan had completed
or approved 133 transactions at gross proceeds of Rs 101.802 billion.

About 66% of the gross receipts was turned over to the Federal Government, 18% was returned to
companies on whose behalf shares were sold, 6% was used for restructuring expenses associated
largely with golden handshakes and rehabilitation, and 5% was used for PC’s privatisation-related
expenditures

While almost all the transactions were settled in local currency, about 58% of the proceeds were
received in foreign exchange from transactions pertaining to 2nd tranche of PTCL vouchers, Kot
Addu Power Plant (KAPCO), Six Oil & Gas Concessions, Habib Credit & Exchange Bank, and
United Bank Limited.

Privatization Of PTCL:

Taking the case of the PTCL, 12 per cent of its shares were sold to the public, including foreign
buyers at a very high premium ten years ago. Neither have we been able to attract a potential buyer
for the PTCL nor has the share value appreciated very much. On the other hand, the PTCL has
been revising its tariff suiting its convenience without taking into consideration the plight of the
subscribers and making huge profits in the bargain.

To hasten the process of the PTCL privatization they engaged the Morgan Grenfell as financial
adviser in Aug 1995, for its re-structuring and sale of 26 per cent of the equity to a strategic buyer
at a total cap of $2.75 million for the retainer fees and $0.75 million for expenses.

The task was to be completed in nine months. After going through the exercise in Nov 1997
Deutsche Morgan Grenfell financial advisers of the PTCL very clearly told the
Privatization Commission (PC) that no major telecom company is prepared to acquire the stake.

The advisors also recommended transfer of the ownership from the ministry of communications to
ministry of finance/PC. Their recommendations fell on deaf years and their contract was
terminated after negotiated settlement.



                                                                                                     10
Privatization


The PTCL's strategic sale has been in the marketing phase since 1996. This was the period when
Mr. Nasim Mirza was brought in as its chairman by the then government with the task of
privatizing it in two years.

He stayed for four years without acheiving the objective. It was during his time that the PTCL lost
its credibility when foreign shareholders were denied the profits on the excuse that they held
vouchers and not the shares, as it was the PTCL's responsibility to convert these vouchers into
shares.

Apart from this, share-holders were not informed what assets would be transferred to the newly
created National Telecommunication Corporation which was to take over all the lines of the armed
forces and other government departments.

This created panic amongst shareholders abroad that had purchased these shares at Rs55 a share.
As the prices crashed, most of the shares were sold out in panic. Now a share is selling at Rs39 not
a big deal because Rs10 share was sold at Rs30 and when the index of Karachi Stock Exchange

has touched 5050 and created an all-time record, the PTCL shares are still floating between Rs39
and Rs40.

The PTCL is a very high value asset-virtually a gold mine for Pakistan. Perhaps this was at the
back of mind of Minister for Privatization Dr Abdul Hafeez when he said that we want to avoid the
situation when we have a public monopoly going in the hands of the private sector.

According to latest balance-sheet, the PTCL's total revenue for the period ending

December 31st 2003 stood at Rs37.10 billion, an increase of Rs4.18 billion over previous year; this
is in spite of reduction in new telephone connections, monthly line rent, international outgoing
calls and NWD charges.

The position of revenue could have been much better if the goos sense have prevailed in early
years when the PTCL was advised to cut down tariff. Due to lack of foresight and bad planning,
the PTCL lost billions of rupees by not entering into cellular business.

The tragedy is that they allowed their entire infrastructure to be used by the cellular companies;
they woke up when it was too late. The PTA role has been disappointing as a regulator authority.
The four cellular companies have done extremely well but contravened the agreement by not
catering the needs of rural areas.

The concentration has mainly been on major cities of Pakistan .It is anticipated that within the next
three to four years cellular telecom sector will have 100 per cent growth. Existing four cellular
companies, U fone, Mobilink, Instaphone and Paktel have around 3.3 million subscribers.
Mobilink being the largest with 2.2 million subscribers is planning to increase its base to 5 million
and so is the case with U fone and other companies.



                                                                                                  11
Privatization


What was the wisdom in inviting more cellular companies when the existing companies had the
potential to meet the growing needs of the people? Even in most advanced countries of the world
the number of cell companies is less than in Pakistan.

It is surprising to note that on one hand, the PTCL is being planned to be privatized on the other
hand millions of rupees are being spent on expansion. This is absolutely ridiculous on the part of
higher management. It is being done to get more prices this is a wrong perception because the
prospective buyers have already determined its price.

The question arises why the PTCL has not come up to the expectations of the people. The truth of
the matter is that it was due to unnecessary political interference from the ministry and the ill-
disciplined CBA has been the main cause of their failure.

The problem with PTCL has been that it is overwhelmed with inefficiency and that short of
immediate restructuring, including manpower audit based on corporate ethics and proper
commercialization, it would continue its downhill slide. This is a unique organization where
people contribute over Rs 11 billion per year without even lifting the handset only to approach the
Wafaqi Mohtasib for their complaints.

UBL:

The UBL was privatized in 2002 with 51 percent of its share sold to Abu Dubai Group, UAE and
Bestway Group, UK. Furthermore. The State Bank holds 48.69 percent of total share capital while
the remaining 0.34 percent stake is divided amongst the government and National Bank of
Pakistan Trustee Department, State Life Insurance Corporation of Pakistan, Sui Southern Gas
Company Limited, Investment Corporation of Pakistan, Metropolitan Steel Corporation, PC,
Pakistan Reinsurance Company Limited and the Securities and Exchange Commission of Pakistan
(SECP).

Deputy Chairman United Bank Limited (UBL), Sir Mohammed Anwar Pervez said the year 2004
had been a tremendous and profitable year for the UBL, statement said. He was addressing the
46th annual general meeting of the bank held at a local hotel in Karachi on March 19. He said, "we
are proud to announce that UBL is now officially the second largest private sector bank in Pakistan
with its 25 percent growth in deposits to Rs 237 billion in 2004.

The bank achieved growth of 51 percent in advances to Rs 150 billion, which is one of the highest
growth rates among the large network banks. This all has been possible due to the continued
commitment, hard work and immense dedication by our CEO Atif Bokhari and his team, he added.

He also thanked his fellow board members and the Chairman, Shaikh Nahayan Mabarak Al
Nahayan for his vision and support.

Commenting on the results, he informed the shareholders that the profit of Rs 5 billion indicates
solid growth for 2004, and with continued focus on revenues in 2005 we are confident of achieving
steady annual growth.


                                                                                                     12
    Privatization


    Cash dividend of Rs 1.50 per share has been declared for the year ended December 31, 2004. In
    context of corporate governance, Sir Anwar Pervez impressed upon all stakeholders, including
    staff members to aim for success but within the confines of credibility, honesty and integrity with
    the spirit of Cupertino.




    Total number of Privatized Transactions up to 17-05-05
                           No. Of Privatized transaction (Rs. In Millions)

SECTOR              From 1991 to         From July2003 to       From July2004      To Date Total
                    June2003             June2004               to 17-05-05

                    #        Amount #             Amount        #      Amount      #      Amount

Banking             6        18614       1        22404                            7      41023
Capital market      11       9727        3        9707          2      6984        16     26418
Energy              12       20904                              2      20241.4     14     41145.4
Telecom             2        30558                                                 2      30558
Automobile          7        1102                                                  7      1102
Cement              11       7557        2        1094                             13     8606
Chemical            17       10198       1        6             1      14125       19     24329
Engineering         7        179                                                   7      179
Ghee Mills          21       756         1        81                               22     837
Rice Plants         23       326                                                   23     326
Textile             2        87                                                    2      87
Newspapers          5        270
Tourism             3        594                                1      1211
Others              5        155
Total               132      101,027     8        33252         6      42561.4     143    176480.4




                                                                                                      13
Privatization


         Source of Proceeds
      Banks and Capital markets             17%
      Telecommunication                     15%
      Energy                                47%
      Industrial Sectors                    21%


                                   Source of Proceeds


                                                         1
                                     4
                                                        17%
                1                   21%
                                                               2
                2
                                                              15%
                3
                4
                                        3
                                       47%



        Distribution Of Proceeds
      Return To GOP                       5%
      Return to SOE                       5%
      Privatization Expenses              23%
      Restructuring Expenses              67%


                         Distribution Of Proceeds
                                                    1
                                                   5%
                                                     2
                                                    5%
                1
                                                         3
                2                                       23%
                3
                                      4
                4
                                     67%




                                                                    14
Privatization




                                     JUSTIFICATION
Privatization is a good policy:

Privatization strengthens the economy of the country. As Privatization results in lessening of a
burden on the Government, in case of a sale of state sectors. Privatization increases the efficiency
of itself and the Economy.

Resources are well utilizes for making of maximum output. That is way private sectors are more
efficient than public sector.

As there is no such a interference of Government on politics in Privatization, so it causes to
develop self-interest quality for the owner of the private enterprise. He takes different steps for
increasing of profits he has full-flagged ownership authority.

Privatization encourages the domestic as well as foreign investment. Because it ensures the long-
term policies. While in case of public sector, there is no surety of political stability especially in
case of a LCD, like in Pakistan.

So, encouragement of investment in private sector ensures for maximization of capital, results of
maximum output.

Moreover there is no over-staffing in private sectors that overcomes the wastage of resources.
Element of regularity can only be seen in private sectors that ensures the discipline of the
enterprise which is a key of success in any organization.

If any public sector is running in loss then it has a resort (support) of privatization policy that can
be utilized well.

In short, Privatization is the back-bone for every economy. Now a days, without privatized sectors
a Government can do nothing for the economic development.




                                                                                                      15
Privatization




REFERENCES:
Web Consulted:

http://www.dailytimes.com.
http://www.privatisation.gov.pk
http://www.accountancy.com.pk
http://www.nation.com.pk
http://www.cbr.gov.pk
http://www.ubl.com.pk
http://www.ppp.org.pk
http://www.finance.gov.pk
http://www.getbestinfo.com
http://www.infopak.gov.pk
http://www.dawn.com
http://www.presidentofpakistan.gov.pk
http://www.ptcl.com.pk
http://www.nation.com.pk
http://www.fpcci.com.pk

Books Consulted:

Economic Survey Of Pakistan
Privatization Policy In Pakistan
Economy Of Pakistan
Economic Problems Of Pakistan

Teacher Consulted:

Nazam Cheema                                      Pakistan College Of Commerce
Prof. Ishaq Athar (Gold Medalist)   Faisalabad College of Commerce and Sciences
Prof. Rana Safdar                                   Punjab College Of Commerce




                                                                                  16

				
DOCUMENT INFO
Shared By:
Tags:
Stats:
views:39
posted:7/20/2011
language:English
pages:16