Privatization is an ongoing trend in many parts of the developed and developing world. Proponents of privatization maintain that the competition in the private sector fosters more efficient practices, which eventually yield better service and products, lower prices and less corruption.
On the other hand, critics of privatization argue that some services -- such as health care, utilities, education and law enforcement -- should be in the public sector to enable greater control and ensure more equitable access.
Economies are divided into two sections: the public sector and the private sector. The public sector represents activities in the areas of enterprise or industry that are handled by various government agencies. The private sector represents all other business operations that are not directly managed by a government entity.
The privatization of a government function involves transferring ownership of the associated business processes or facilities to a company within the private sector. For example, in 2012, Washington State voted to privatize the sale of liquor within the state. Previously, the sale of liquor was handled strictly through state-owned liquor stores.
After the change was enacted, private businesses such as Walmart and Costco were able to sell liquor. Previously state-operated liquor stores were either closed or sold to privately held companies.
Privatization, therefore, is one of the strategies for economic re-engineering embarked upon by governments to remedy or correct the problems associated with state owned enterprises.
There are other measures for dealing with the problems of state owned enterprises such as joint venture and commercialization.
Privatization is, however, the most common strategy adopted by governments to improve the delivery of services by state owned enterprises.
In the opinion of Okorodudu-Fubara, privatization, in a nutshell, is a term of art which may best be described as that component of the government’s strategy to restructure the economy by relinquishing fully or partially its ownership of some corporations, parastatals and public owned companies through the sale of its equity shares or ownership of these organizations to private interests, thus reducing the size of an overburdened public sector economy.
Though privatization and commercialization are twin concepts, one is different from the other. Commercialization as a concept refers to the reorganization of an enterprise wholly or partly owned by the Federal Government whereby such commercialized enterprises would operate as profit making commercial venture and without subventions from the government. Like privatization, commercialization can also be full or partial.
Full commercialization means that enterprises so designated will be expected to operate profitably on a commercial basis and be able to raise funds from the capital market without government guarantee. Such enterprises are expected to use private sector procedures in the running of their businesses.
Commercialization is the process of running a public corporation or enterprise for a profit. It involves a change in the objectives of public corporations from being a mere social service provider to a profit earning organization.
Commercialization implies the management of a government – owned enterprise for profit involving the re- organization of enterprises wholly or partly owned by the government in such a way that they would operate as profit- making commercial ventures without subvention from the government.
This means that government parastatals which receive subvention or subsidies from the government are to become self- supporting and break even in their operations. Such public corporations would not expect subventions from the government anymore.
In privatization, the government completely gives up its ownership and control of public corporations while in commercialization; the government does not relinquish its ownership and control.
But such commercialized enterprises may no longer enjoy subvention from the government. The commercialized and privatized corporations will, however, compete for addition of capital requirement in the financial market.
This growth of privatization has not, of course, gone uncontested. Critics of widespread privatization contend that private ownership does not necessarily translate into improved efficiency.
More important, they argue, private sector managers may have no compunction about adopting profit-making strategies or corporate practices that make essential services unaffordable or unavailable to large segments of the population.
A profit-seeking operation may not, for example, choose to provide health care to the indigent or extend education to poor or learning-disabled children.
Efforts to make such activities profitable would quite likely mean the reintroduction of government intervention—after the fact. The result may be less appealing than if the government had simply continued to provide the services in the first place.
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