Privatization is 

the process of transferring an enterprise or industry from the public

sector to the private sector. The public sector is the part of the economic system that is
run by government agencies.

Privatization describes the process by which a piece of property or business goes

from being owned by the government to being privately owned. It generally helps
governments save money and increase efficiency, where private companies can move
goods quicker and more efficiently.

Dozens of developing nations have engaged in large privatization programs, the process
of shifting ownership and/or control of a state-owned enterprise to the private sector,
to improve productivity, increase national economic wealth and help cope with the
massive international debt problem. While MNC participation has the potential for
considerable upside benefits, if such involvement is not done with sensitivity and care
for the host nation and its people, the downside risk of privatization can be far greater.

Potential benefits of privatisation

1. Improved efficiency
The main argument for privatisation is that private companies have a profit incentive to
cut costs and be more efficient. If you work for a government run industry managers do
not usually share in any profits. However, a private firm is interested in making a profit,
and so it is more likely to cut costs and be efficient. Since privatisation, companies such
as BT, and British Airways have shown degrees of improved efficiency and higher
profitability.

2. Lack of political interference

It is argued governments make poor economic managers. They are motivated by
political pressures rather than sound economic and business sense. For example, a
state enterprise may employ surplus workers which is inefficient. The government may
be reluctant to get rid of the workers because of the negative publicity involved in job
losses. Therefore, state-owned enterprises often employ too many workers increasing
inefficiency.

3. Short term view

A government many think only in terms of the next election. Therefore, they may be
unwilling to invest in infrastructure improvements which will benefit the firm in the long
term because they are more concerned about projects that give a benefit before the
election. It is easier to cut public sector investment than frontline services like
healthcare.

4. Shareholders
It is argued that a private firm has pressure from shareholders to perform efficiently. If
the firm is inefficient then the firm could be subject to a takeover. A state-owned firm
doesn’t have this pressure and so it is easier for them to be inefficient.

5. Increased competition
Often privatisation of state-owned monopolies occurs alongside deregulation – i.e.
policies to allow more firms to enter the industry and increase the competitiveness of
the market. It is this increase in competition that can be the greatest spur to
improvements in efficiency. For example, there is now more competition in telecoms
and the distribution of gas and electricity.

 However, privatisation doesn’t necessarily increase competition; it depends on

the nature of the market. E.g. there is no competition in tap water because it is
a natural monopoly. There is also very little competition within the rail industry.
6. Government will raise revenue from the sale
Selling state-owned assets to the private sector raised significant sums for the UK
government in the 1980s. However, this is a one-off benefit. It also means we lose out
on future dividends from the profits of public companies.
Disadvantages of privatisation

1. Natural monopoly
A natural monopoly occurs when the most efficient number of firms in an industry is
one. For example, tap water has very high fixed costs. Therefore there is no scope for
having competition among several firms. Therefore, in this case, privatisation would just
create a private monopoly which might seek to set higher prices which exploit
consumers. Therefore it is better to have a public monopoly rather than a private
monopoly which can exploit the consumer.
2. Public interest
There are many industries which perform an important public service, e.g., health care,
education and public transport. In these industries, the profit motive shouldn’t be the
primary objective of firms and the industry. For example, in the case of health care, it is
feared privatising health care would mean a greater priority is given to profit rather
than patient care. Also, in an industry like health care, arguably we don’t need a profit
motive to improve standards. When doctors treat patients, they are unlikely to try
harder if they get a bonus.

3. Government loses out on potential dividends.

Many of the privatised companies in the UK are quite profitable. This means the
government misses out on their dividends, instead going to wealthy shareholders.

4. Problem of regulating private monopolies.

Privatisation creates private monopolies, such as water companies and rail companies.
These need regulating to prevent abuse of monopoly power. Therefore, there is still a
need for government regulation, similar to under state ownership.

5. Fragmentation of industries
In the UK, rail privatisation led to breaking up the rail network into infrastructure and
train operating companies. This led to areas where it was unclear who had
responsibility. For example, the Hatfield rail crash was blamed on no one taking
responsibility for safety. Different rail companies have increased the complexity of rail
tickets.

6. Short-termism of firms
As well as the government being motivated by short-term pressures, this is something
private firms may do as well. To please shareholders they may seek to increase short-
term profits and avoid investing in long-term projects. For example, the UK is suffering
from a lack of investment in new energy sources; the privatised companies are trying to
make use of existing plants rather than invest in new ones.
QUESTION TWO

Introduction

The historical formation of any civil society in Uganda is traceable to the colonial period,
mainly through the work of trade unions, youth organisations, women’s organisations
and ethnic associations. Although the British colonial government had a colonial policy
encouraging the development of viable trade unions, interest in indigenous trade union
growth did not start until after the Second World War.49 The first trade union, the
Uganda African Motor Drivers’ Association, was formed in 1938 by James Kivu and
Ignatius Musaazi, who both later became prominent politicians in Uganda and Buganda.

Many suggest that this union rarely performed the functions of a true trade union in
terms of representing the interests of its constituent members, but instead that their
activities were politically motivated.

However, later activities suggest that, in fact, the union did exactly what a trade union
is expected to do: represent its members. For example, in 1945, the union organised
numerous strikes and riots over wages, although the colonial government generally
argued that the strikes and riots were more political than economic. In the wake of the
strikes, the union leaders like Kivu and Musaazi were deported to Karamoja and the
union wound up its activities.

However, the causes of the 1945 strikes had not been addressed. Young Baganda
radicals still chafed at the policies of their own rulers and the union was still the only
vehicle for political expression. Musaazi was eventually released in 1946 and returned to
the union to reorganize it

Contributions of civil society organizations

Civil society organizations help in setting NGO priorities. To be sustainable, donor

programs must be driven by the priorities of local stakeholders, including civil society
organizations. This requires a targeted effort to reach those often excluded from
policymaking—women, girls, youth, and other marginalized groups.

NGOs can use its investment in civil society organizations to combat the
inequality that leaves some groups excluded from the economic, political, and social life
of a country.

Bebbington (2004) has argued that CSOs play a key role in promoting inclusive
social, economic and political development by acting as alternatives to a state
apparatus.

CSOs are often seen as advocates of the poor through their participatory and
citizen-driven approach that has the potential to deliver bottom-up approaches to
development

The prominence of civil society is to a large extent grounded in their ability to

enhance collective action. The literature on democratic governance argues that CSOs
promote collective action by increasing opportunities for interaction, networking and
consensus-building among citizens

The resulting social capital plays an important role in forming networks between
different ethnic and social groups. Such networks are perceived as channels that
enhance the flow of information, thus promoting dialogue and the representation of
citizens’ interests

As such, CSOs emerge as crucial mediation structures to address collective action

problems that hinder political participation

Civil society organisations are also viewed as service providers. In most

countries, CSOs are involved in the provision of a variety of public services such as
health and education services, or more targeted efforts towards emergency response,
conflict management and advocating the rights of marginalised groups in society.
 Not only do CSOs complement the state in service provision, they are posited to
have a comparative advantage due to their ability to innovate through experimentation,
and flexibility to adopt new approaches, programmes and modes of engaging with the
state and citizens, as well as their ability to promote the sustainability of projects by
boosting citizen participation.

The close proximity between CSOs and the constituents they represent is
important in providing the freedom to discuss, select and implement projects that are
aligned with local needs, leading to a bottom-up approach to development that is
anchored in effective participatory mechanisms

Another important role of civil society is their emphasis on improving the political
environment. Civil society organisations have been viewed as organisations that
enhance the interests of marginalised groups in the political arena. However, a key
contentious issue is the complexity of relationships between CSOs and most
governments. In most instances, CSOs have been viewed as competitors and as acting
in opposition to the government which, at times, limits their ability to influence
government policies.

Internal governance of CSOs is essential for creating strong accountability structures,

required for fostering membership trust and strengthening cohesiveness within the
organisation. Analytical evidence, however, suggests that many CSOs in Uganda, both
old and new, are constrained by a number of bottlenecks that inhibit their capacity to
build strong and accountable organisations. These include:

Constraints on internal governance of civil society organizations

Internal governance of CSOs is essential for creating strong accountability structures,

required for fostering membership trust and strengthening cohesiveness within the
organisation. Analytical evidence, however, suggests that many CSOs in Uganda, both
old and new, are constrained by a number of bottlenecks that inhibit their capacity to
build strong and accountable organisations. These include:

(i) Administrative constraints:

Many traditional organisations struggle to attract and retain well-qualified staff because
of limited budgets. Budget constraints result from their inability to raise income from
membership subscriptions and voluntary donations from members. This, in turn, stems
from the weak accountability mechanisms that have undermined members’ trust and
commitment to these organisations. This is particularly common with cooperative
organisations such as Wamala Union and Cooperatives under UCFA. Although these
organisations have existing boards, many struggle to hold the executive or secretariats
to account.

(ii) Informality of the governing organs:

Many CSOs have governing organs that (in theory) should be building and promoting a
culture of accountable governance within the organisations. Nearly all organisations
have constituent boards to which the executives or secretariat is supposed to account.
The challenge is that most of these boards are established to fulfil a regulatory
requirement and there is no real commitment from the board or the secretariat to
promote accountability within the organisation. In many new organisations, particularly
NGOs, the founders decide on the constituent members of the board and in this
context, it becomes almost impossible for the board members to act independently. In
old organisations, whereas board members are electable, the pecuniary benefits they
receive for serving on the board often paid out by the executive or secretariat imply
that the boundary between the board and the executive becomes completely blurred.

(iii)Financial constraint:

Many of the CSOs struggle to raise enough revenue to implement civic activities. In old
CSOs common sources of revenue are membership subscription fees as well as
commissions from the provision of services to members, especially by those CSOs
involved in trade. With the exception of UMA, which has a large membership of private
companies operating in the manufacturing industry of Uganda, many of the other old
CSOs struggle to raise enough revenue.130 In part, this stems from failure to properly
account for the collected revenue, which attenuates the membership base and the
commitment of members to make future contributions. New CSOs rely mostly on
external donor financing, and devote very little or no effort to raising funding
domestically. Considering that most of the donor financing shifts with changes in
programmatic focus, some new CSOs occasionally find themselves underfunded and
have to scale back their operations.
Globalization also refers to a process of interaction between societies and local
cultures in a global culture to what we would call socio-cultural globalization.

The word "globalization" is defined by different authors, official institutions and

dictionaries according to their point of view. Therefore, there is not only one precise
meaning of this term universally accepted by everybody.

Reasons In favour of globalization

Globalization advances communication and transportation

Globalisation is good because advances in communication and transportation

technology, combined with free-market ideology, have given goods, services and capital
unprecedented mobility. For example, Northern countries want to open world markets
to their goods and take advantage of abundant, cheap labour in the South. To do this,
these countries use international financial institutions, such as, the International
Monetary Fund and the World Bank Group, and regional trade agreements to compel
poor countries to "integrate" by reducing tariffs, privatizing state enterprises and
relaxing environmental and labour standards.

Globalisation helps in boosting and improving on commerce

Globalization is a phenomenon that is important to the develop of the economy in every

country, due to the general opening of markets for goods and capital suggests the end
of trading blocs, regional treaties and economic independence of countries but also
facilitates the ability to solve economic needs that local players have been unable to
satisfy. It makes easy the commerce between different countries and decreases the
difference between developed and underdeveloped countries.

Globalisation and global competition

In addition, globalisation leads to global competition, and in the long run, to local
competition, ensuring the improvement of creative abilities and innovative capabilities.
Competition between producers of commodities ensures the quality of the products and
services at reduced prices, leading to specialisation and efficiency.

Effects of globalisation on world trade

Again looking at the effect of globalisation on world trade, and indirectly on trade in
developing countries, it is quite obvious that it enhances economic growth. One of the
emphasis of globalization is that member countries should open their markets to ensure
open trading free of limitations. In this regard, liberalisation of trade would lead to the
removal of all restrictions, causing unrestricted forces of demand supply to direct the
movement and substitution of the factors of production, leading to efficient investment
by producers (Mubiru 2003). This is clearly evident in developing countries such as
Uganda in which reduced trade restrictions has lead to a large improvement in the
nation’s economy (Lawal 2006).

Again, from the positive impact of globalisation on trade, there is an ‘emerging trend
towards trade in production components’ (Mubiru 2003). Reduction in trade restrictions
in a lot of developing countries lead to the partial relocation of several manufacturers
from more industrialized nations to new locations in developing countries. This may
have arisen as a result of tax exemptions or reduced tariffs offered by many developing
countries in order to encourage foreign investors, or increased proximity to cheap
labour and occasionally consumers. And the resultant benefits to the host developing
nations are numerous. One is an increase in employment opportunities for the
indigenes as there is creation of more jobs. Also, influx of foreign manufacturers may
also lead to the import of new technology. And with transfer of new technology from
developed countries comes more opportunities for training for local employees. ‘Quite
often manufacturing subsidiaries have also been linked to establishment of distribution
networks that expand employment even further’ (Mubiru 2003). This, in some cases,
has lead to impaction of entire regions at a time, causing the benefits to go beyond
national boundaries. Taking this further, the slackening of barriers to various other
products and sectors, especially agricultural products, would lead to immense gains to
developing nations.

Globalization improves the standards of living

Another positive impact of globalization on developing countries is an increase in

standard of living. One of the aims of globalization of economies is to reduce poverty,
and this aim is being achieved by the increased access to foreign funding from
industrialized nations to developing countries. And the spending of these funds on
improving the education, health, social, and transport infrastructure of the developing
nations aids in improving the standard of living of the people.

Thanks to globalization, developing countries now have access to new markets. And
this has been taken full advantage of by several nations (Bertucci & Alberti 2001). This
opening allows the transnational movement of labour, foreign capital, new technology
and management to developing countries from the more industrialized nations. There is
now an increase in the inflow of foreign direct investment to developing countries as
more than a quarter of world foreign direct investment inflows were received between
1988 and 1989 and this has increased yearly (World development indicators in Bertucci
& Alberti 2001). From US $12 billion in 1980, private capital flows to developing
countries increased to US $140 billion by 1997 (Bertucci & Alberti 2001). The only catch
to this is that the bulk of these capital flows so far is strictly limited to a small number
of developing countries, especially the big ones such as Nigeria, Ghana, South Africa,
India, Brazil, China, etc. ‘The report on financing for development prepared for the UN
Secretary-General notes that, during the period 1993 to 1998, 20 countries accounted
for over 70 per cent of all FDI inflows to all developing countries’ (Bertucci & Alberti
2001).

Some factors in favour of globalization are:

 Global economy and market, which can lead to a better utilization of resources.
  Greater ability to maneuver compared to fluctuations in national economies.
 New opportunities of develop markets.
 Using economies of scale, it can reduce cost.
 International cooperation.
 Growth and mergers between companies.
 Privatization of public companies.
 International financial deregulation.

Development of means of communication and transport.

The free movement of capital allows a more efficient allocation of global savings and
provides to emerging economies the resources to develop and promote the
consolidation of a sustained and balanced growth.

Globalization opens up opportunities for developed economies to improve their

efficiency and productivity and allows economies in developing to improve the living
standards of its population.

Globalisation negative impacts on developing countries

One of the major negative impacts of globalization on developing countries is poverty.

Globalization has been said to increase poverty. Many millions of people are excluded,
left behind in squalor . . .” (Annan 2000). Although the exact impact of globalization on
poverty is very difficult to assess, research estimates show that poverty has increased
by 82 million, 14 million, and 8 million in sub-Saharan Africa, Europe and Central Asia,
and Latin America and the Caribbean respectively (Globalization and its impact 2004).

Globalization itself cannot be held responsible for most of the poverty in developing
countries as other factors such as bad governance, poor economic policies, weak
reforms, etc have also implicated.

Globalization leads to wealth redistribution – ‘global richness and local poverty’. It

makes the rich countries, in this case, the industrialized nations, to become richer, and
the poor nations, the developing countries, to become poorer (Zygmunt Bauman in
Beck 1997).

Considering globalisation from the health and disease angle, it has impacted seriously
on the epidemiology of infectious diseases, as regards the ability to prevent, control and
eradicate these diseases, worldwide and especially in developing countries. One of the
ways by which this has occurred is the enhancement of technological capacities
worldwide, leading to increased emissions and a resultant global warming. This in turn
leads to enhanced breeding of vectors such as mosquitoes, animal or human
behaviours such as bathing in pools which may have been contaminated with the larvae
of schistosomes, etc.

The introduction of western lifestyle through globalization to the developing has led
gradually loss of core values leading to increased looseness and promiscuity among the
youth and adults alike. This has caused a surge in the numbers of those living with
HIV/AIDs, and the long-term effects on the economy and society at large.

Globalization has increased the vulnerability of the rural farmer in the remotest village
to world events. An example is the case of coffee farmers in Uganda.

Today, the employment structure in developing nations has been changed, a result of
globalization and capitalism. Before the advent of globalization in developing countries,
the main source of occupation for the active members of the population, both men and
women, was agriculture. But since the influx of foreign corporations occurred, there has
been a sectoral shift in the labour force as more hands are being drafted towards
assembly production and fewer hands left in the fields.

Globalization affects individuals through three main channels: changes in their labour
income; changes in relative prices and hence consumption; and changes in household
production decisions’

Conclusion
This paper has been able to show globalization as a complex process with wide
reaching impacts on developing countries. Globalization on its own has a lot of gains
and benefits, but due to the influence of some other factors and especially the nature
and structure of most developing nations, it impacts negatively despite its advantages.
These impacts hold serious challenges for developing countries in the face of needed
economic growth and development for these countries. To this end, the leadership of
the various nations in the developed world must understand that their major
responsibilities lie in the needs of their immediate societies.
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