Economics » Business Organisations » Privatisation and Commercialisation

Privatisation and commercialisation

Privatisation and commercialisation are part of the efforts, of mostly developing countries to restructure economies for sustainable growth and development.

Privatisation

Privatisation can be defined as the process of transferring ownership and control of publicly owned enterprises from the government (public sector) to private individuals and companies (private sector).

Impact of Privatisation

If a privatisation programme is carefully packaged and faithfully executed, it could impact positively (advantages) on the economy in the following ways:

  1. Free the government from heavy annual subventions and subsidies to unprofitable enterprises.
  2. Promote competition, efficiency, and improved service delivery.
  3. Facilitate commerce and trade within the local economy.
  4. Promote integration of the local economy into the global economy.
  5. Facilitate the emergence of modern and innovative entrepreneurs and the development of local ones.

However, if a privatisation programme is poorly packaged (disadvantages), it could lead to massive retrenchment of public sector workers and engender over-concentration of wealth in the hands of a few individuals. This could worsen the problem of poverty in the country.

Commercialisation

Commercialisation is the process of re-organising a public enterprise to make it self-sustaining and self-accounting, instead of depending on the government subventions and subsidies for its survival and operation.

The primary goal of commercialisation is to promote efficient use of public resources, as well as improving the quality of service delivery, especially in areas that are critical to the growth of the economy and poverty reduction.

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