Download the theory of privatization

PERİHAN ALTIN & ÖZLEM ÖKSÜZ
THE THEORY OF PRIVATIZATION
A. NARROV MEANINIG OF PRIVATIZATION: DENATIONALIZATION
Denationalization refers to the sale of assets or shares of a publicy owned enterprises to
the private sector
B. BROAD MEANINIG OF PRIVATIZATION
 Contracting-out
 Franchising
 Deregulation and Decontrol
 User charges
 Grant system
 Voucher system
 Management contract
 Leasing
 Joint venture
 Build – operate – transfer (BOT)system
 Non-Profit organization
1-CONTRACTING-OUT :The government contracts out with the for –profit as well as notfor profit organizations for the delivery of goods and services. Contracting-out is common
especially in such services as public works and transportation, public safety services,health
and human services, parks and recreations services etc…
2-FRANCHISING :The government gives a special monopoly privilege to a private firm to
produce and suplly some part of a particular services.
3-DEREGULATION AND DECONTROL:”Public regulation” and “public control” are
broad concpts in the sense that they define the various ways, in which governmentmay
intervene directly to the economic agent. All type of “public controls” be abolished.
4-USER CHARGES: (Higher education, health services, cable TV, electric power, likes that)
some types of goods and services can be either provided free of charge and financed by taxes
or by the imposition of a fee or user charges to the individuals who receive benefits.
5-GRANT SYSTEM: Grant and subsidies are financial or in-kind contributions to individuals
or private firms by government.
6-VOUCHER SYSTEM: It is designed to encourage the consumption of particular goods and
services by a particular class of consumers. Types of voucher system are;
 Tuition voucher
 Medicre/medicaid voucher
 Child care voucher
 Housing voucher
 Transportation voucher
 Food voucher
 Clothing voucher
7-MANAGEMENT CONTROL: Government may sometimes retain full ownership of
public economic enterprises and/or other public facilities but transfer its management to a
private firm.
8-LEASING: Local government rents its trucks to a private firm for the solid waste collection
in the city. In this case, management and operation are carried out by the private firm.
9-JOINT VENTURE: Privatization encompasses all pactises aiming to reduce the role and
scope of the public sectorand to increase private sector activities in the national economy.
10-BUILT-OPERATE-TRANSFER (BOT) SYSTEM: The system is quite simple and seek to
attract foreign capital. Direct foreign capital investment are encouraged to build infrastructure
facilities, petroleum exploration station etc within the developing, at the end of contract, the
facilities and establisment are transferred to the government.
11-NON-PROFIT ORGANIZATION: It , which are called “voluntary organization” or
“philanthropic organization”, also provide some public goods and services.
THE OBJECTIVE OF PRIVATIZATION
1. Greater efficiency
2. Revealing the true and full cost of the service provided
3. Promotion of technological advancement
4. Development of capital markets
5. Broadening the wealth and achieving widespread private ownerships in society
6. Curbing inflation
7. Raising extra-revenues for the government
8. Eliminating hidden unemployment and reducing thepower of public employee unions
PRIVATIZATION IN TURKEY
Since 1985, State shares in 241 companies, 4 power generators, 22 incomplete
plants, 29 energy generation and distribution units and 5 real estates have been
taken into the scope of privatization portfolio. Later, 22 of these companies, 4
power generators and 4 real estates were excluded from the portfolio for various
reasons.
Currently there are 38 companies and some real estates in the portfolio and 26
of these companies have more than % 50 State shares.
GÜLÇIN ARIÇELIK
PRIVATIZATION AND PRIVATIZATION IN TURKEY
Privatization is frequently used referring to the sale of a publicly owned enterprise (POE)’s asset or shares to
the individuals or private firms. However, this definition gives only a narrow meaning of privatization. In
broader meaning,it refers to restrict government’s role and to put forward some methods or policies in order to
strenghten free market economy.
I.THE CONCEPT OF PRIVATIZATION
A. NARROW MEANING OF PRIVATIZATION: DENATIONIZATION
Denationalization refers to sale of assets or shares of a publicly owned enterprises to the private sector.
According to the this definition, when a small part of shares/assets are sold to the private sector, it can be called
as ‘’denationalization’’. However, it is more appropriate to define denationalization as transferring at least 51
percent shares of a POE to the private sector. In this case, transfer of ownership (sale of shares) results in
transfer of management and operation as well. However, full denationalization requires that all shares and assets
of a POE must be sold to the private sector.
We can face some problems during denationalization process;
 Timing and planning problems
 Priority problems
 Political Instability and uncertainty
 Economic Instability and uncertainty
 Weak and underdeveloped capital markets
B.BROAD MEANING OF PRIVATIZATION
Denationalization is only one form of privatization. In broad meaning, privatization refers to the transfer of
functions previosly performed exclusively by the public sector to the private sector. In other words,
privatization is an umbrella term, which encompasses all methods or policies implemented to increase the
role of market forces within the national economy.
PRIVATIZATION METHODS
 Contracting-out
 Deregulation and decontrol
 Franchising
 User changes
 Grant system
 Voucher system
 Management contact
 Leasing
 Voint Venture
 Build-Operate-Transfer (BOT) system
 Non-profit Organization
THE OBJECTIVES OF PRIVATIZATION
A.Greater Effıcıency
Privatization fasters competition and thereby results in efficiency and effectiveness within
sectors.Competition is very important to obtain more efficient and effective public services.
B. Revealing The True And Full Cost Of The Service Provided
Publicly provided goods and sevices are underpriced because of some political and economic reasons.
Politicians want to maximize their votes and people would like to get services free of charges. So public
pricing of goods and services tends to be below the cost of production of these services.
C. Promotion Of Technological Advancement
Competition as a result of privatization forces enterpreneurs to introduce new methods of production which
will generate additional output with the same amount of inputs.
D. Development Of Capital Markets
The main purpose foe establishing a capital market is to withdraw some of the savings of individuals and
private firms and to lead them toward productive investment fields.
E. Broadining the Wealth and Achieve Widespread Private Ownership In Society
Privatization can broaden the wealth and achieve widespread private ownership in Turkey.
F.Curbing Inflation
In many countries public economic enterprises do not work efficiently and effectively they are usually in
need of supplementary funds from general account budget.So they cause cost-push inflation. Privatization
can be considered a disinflatory tool.
G.Raising Extra Revenues for the Government
One of the objective of privatization would be to raise revenues for the government.This strategy would be
important when the government encounters a financial crises.
H.Eliminating Hidden Unemployment and Reducing the Power of Public Employee Unions
By privatization cost of hidden unemployment can be eliminated.