Argue the case for privatization of state corporations.

1. Privatization which involves the sales of state – owned assets provide the government with a short – term source of revenue which can be used to finance development expenditure such as infrastructure development.
2. It helps to reduce public spending and the public sector borrowing requirement. This is especially so if the state can sell – loss – making enterprises and public spending on subsidies fall. The public sector borrowing (PSBR) may also fall if private ownership returns industries to profitability since corporation tax revenue will increase and the state may earn higher dividend income from any share it still possesses in the privatized company.
3. Privatization increases competition thereby increasing a locative efficiency where the organization has ran with prices higher than marginal cost. Competition could force an organization to be more cost – conscious, making it easier for changes in work practices to be introduced and enforced both at an operational level and in the management of the organization.
4. Where privatization results in the breaking of state monopoly, so that a number of competing firms are able to operate, consumer choice may be enhanced. Competing firms are more likely to respond to consumer demand and quality of service should be improved and innovation encouraged in both products and the means of their production and distribution.
5. Privatization can change the organization culture in that the often – borrow vision of directorate and management and supply orientation of the organization can be replaced by a mean more commercially aware enterprise. Restraints can be removed in financing and market of products diversification. Links with other companies through joint ventures can be developed. It makes it more difficult for political interference since politicians who used parastatals for their own ends cannot easily do so with private enterprises.
6. It has a role in promoting an enterprise culture through extending share ownership to individual and employees who did not own shares previously. It is therefore conducive to hand work and accepting responsibility.

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Kavungya answered the question on May 6, 2022 at 06:18