Market structure is an impact as well with privatization on the economy. Even though the public enterprise is well regulated and managed, privatizing firms can lead to higher yields as well. It may be possible as well that setting the public monopoly by private monopoly will also raise productive efficiency because of the reduced governmental and political involvement. Privatizing public enterprises in a competitive market can be valuable. As mentioned earlier “India’s central government is a majority shareholder in 240 public enterprises, 27 banks, and 2 large insurance companies.” “ Only some of these enterprises generate profits.” (Dinavo).
India began its decentralization in 1991, after the government was made to mortgage a large part of its gold reserves. India has two main forms of the public sector; one is departmentally owned and managed for example, railways and telecommunications. And the other form enterprises established under the Companies Act. In the 1990’s India’s telecom privatization was put on hold because of scandals. Telephone privatization is one of the leader’s of India’s five year old plan to open up to foreign investment and trade, a policy the new government says it will pursue.
Africa has been thinking seriously about the future of their economy. Due to poor governmental priorities constitutes a major cause of Africa’s depression, there are other reason as will that contribute to Africa’s economy. International recession, natural disasters, distribution of income and shortage of private investment capital. There should be a trade off between efficiency and equity in designing the policy objective of privatization in Africa. The objectives of privatization must be designed and implemented on a case-by-case basis depending on the industry or sector. “For example, the primary objective of privatization with regard to public utilities should e efficiency, rather than an increase in the investor base.” (Tanyi). If the government decides to privatize only a small amount of its public enterprise sector, the benefits of privatization will be limited to the particular enterprises, while the impact on the economy as a whole will be minimal. “ A investor friendly institutional framework is a prerequisite for privatization and private sector development in Africa.” (Tanyi). Most of the African countries have repaired their macro-legal, regulations, and political and financial reforms. Because of the international perception of Africa of systematic-instability, potential investors have not even noticed the macro-legal and regulatory reforms that have been made in recent years. The future role of privatization in Africa will eventually create new business opportunities and jump-start the economy. Private economic power means that the political power will change eventually from the central government to the citizenry. This can be a huge step toward political maturity and democracy. “However, the political cost of a corrupt privatization program could be overwhelming.” (Tanyi). Military coups in Africa generally thrive widespread dissatisfaction with politicians. “Also, investors seeking to achieve long term capital appreciation may not participate in a blatantly corrupt privatization program for that fear that a new regime might undo previous divestitures.” (Tanyi). Privatization of Africa’s economies would take apart power that certain ethnic groups and political groups have taken over in certain countries. A nation must privatize in order to survive as a competitive economy. Thus, privatization may be the solution to economic weakness and inefficiencies, poverty, mismanagement and deficits.
Privatization has played a vital role in many other south Asian countries as well. Pakistan’s objectives of privatization at different points in time have varied. “During the period 1988-90, privatization was pursued to divest 14 loss making manufacturing units and raise funds by selling shares of profit making units for retiring public debt and thus reducing debt servicing.” (Osama). Some objectives are to improve the level of efficiency in the production process, reduce government deceit and fiscal deficit, and releasing resources for the physical and social infrastructures. Pakistan is looking for some of the same outcomes as India’s and many other countries. Pakistan and India’s economy are relatively similar with the poverty and government scandals. Public enterprises may be liquidated in Pakistan. Public enterprise is making these losses possibly because wrong location and poor technology and many other factors can be affecting this. Competitive market structure allows producers to reduce the cost and increase output level here marginal cost will be at minimum. Privatization in a competitive market results in higher levels of production. While regulating prices, a monopolist may be forced to lower the prices to marginal cost. “Comparing efficiency between public sector industrial enterprises and private sector firms in the manufacturing industries in Pakistan where both the sectors simultaneously operated prior to the divestiture of manufacturing industries failed to substantiate higher levels of efficiency of the private sector firms compared to public sector firms.” In Pakistan the decline in the growth rate of investment has been even more dramatic. “ The average growth rate of investment fell from 5.55 per cent to just 1.82 and growth rate from 5.9 to 1.76 percent.” “The output and investment in the manufacturing sector show similar trends as observed in the aggregate GDP and investment. Sharp fluctuations in the investment in the post privatization period needs to be noted. Investment rose sharply during 1991-1994 ranging between 4.4 and 4.8 present of GDP, but since then it has declined.”
India has had some other their public sector enterprises close down certain activities by subcontracting them to private parties. Some of the activities privatized and brought under subcontracting include catering, message and courier service; and security, cleaning and maintenance of office buildings. Some suggestions to strengthen the privatization system in India are that the authorities can sell profitable, competitive, and trouble free enterprises. India has made a progress since the crisis of 1991. After its balance of payments crisis of 1991, many macro-economic reforms have been undertaken in India to make itself a market-oriented economy. It has been more liberal and welcoming to trade and foreign investments and exports. Regulatory control has been decreased.
There are different consequences for each form or type of privatization it has differed in implications for the labor, consumers and the economy. Privatization process in India has been in many forms. A change has been in opening for the areas of exclusive development in the public sector. Many privatization analysts have recommended sale to employees, or at least the reservation of shares for past and present employees. There are strong political reasons for reserving some shares of public enterprises to be divested for workers. Labor ownership of the firm may lead to more peaceful labor relations. It is possible that if the work force is reduced but labor ownership is granted, productivity will rise. Good management is possible with workers as shareholders since workers can observe the "unverifiable" contribution of fellow workers. Moreover, worker-ownership of privatized firms can create political support for privatization. Trade unions are likely to extend their support to the privatization program if they see that the workers are going to become shareholders. Hence, the authorities may consider selling shares of public enterprises to workers at a discount.
Therefore, privatization in India, Africa, and Pakistan eventually shall increase the competition and growth of the economy. There will be less governmental interference. Many of these developing countries are controlled by a corrupted political system. Transferring these public enterprises to private enterprises gives the government a smaller role on the enterprises. Hence, raising funds to pay off national debts. Privatization should no be used as a scapegoat the state to solve its economic and social problems. Privatization can create more jobs, increase incomes and improve standard of living. For these developing countries privatization would be the process that promotes economic development and democracy. Also, improving the performance of the former public enterprises. Bureaucratic control that once existed in the public sector would be reduced, the number of unproductive employees would be cut and the efficiency and performance would be greatly improved. Privatization can decrease poverty, which has been a main concern for developing countries such as India, Africa and Pakistan. The pace of privatization in developing countries appears to be slow. Hence, India, Pakistan and Africa will eventually gain a lot by privatization in the present and future.
REFRENCE
Abu Shair, Osama J. Privatization and Development. St. Martin’s Press. New York, 1997
Cook, Paul. Privatization, Enterprise Development and Economic Reforms. Edward Elger. Massachusetts, 1998.
Dinavo, Jacques V. Privatization in Developing Westport, CT, 1995.
Tanyi, Gerlald. Designing Privatization Strategies in Africa. Prager. Westport, CT, 1997.