A PROJECT ON

A STUDY ON PRIVATIZATION OF PUBLIC ENTERPRISES AND ITS

IMPLICATIONS ON ECONOMIC POLICY AND DEVELOPMENT

SUBMITTED TO:
UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE
DEGREE OF BACHELORS IN COMMERCE (ACCOUNTING & FINANACE)
UNDER THE FACULTY OF COMMERCE
SUBMITTED BY
SNEHAL MAHENDRA SINGH
ROLL NO: 58
T.Y.BAF
(VI SEMESTER)
UNDER THE GUIDANCE OF
M/S NILAM GADDA

NES Ratnam College of Arts, Science and Commerce,

NES Complex, National High School Marg, Bhandup,
Mumbai-400078

ACADEMIC YEAR
2022-2023
 NES Ratnam College of Arts, Science and Commerce
NES Complex, National High School Marg, Bhandup, - 400078

CERTIFICATE

This is to certify that M/S Snehal Mahendra Singh has worked

And duly completed her project work for the degree of bachelor in commerce
(Accounting & finance) under the faculty of commerce.
“A Study on privatization of public enterprises and its implication on economic policy and
development” under my supervision
I further clarify that the entire work has being done by the learner under my guidance and that no part of it has
being submitted previously for any Degree or Diploma of any university.
It is her own work and facts reported by her personal findings and investigations.

Date of submission:
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth
Is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
Dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to
Do this project.
I would like thank my Principle, Vinita Dhulia for providing necessary facilitiesrequired for
completion of project.

I would also like to express my sincere gratitude towards my project guide M/S NILAM GADDA
Whose guidance and care made project successfully.
I would like thank my College library, for having provided various reference books and magazines related
to my project.
Lastly, I would like thank each and every person who directly or indirectly helped me in the completion of
Project especially my Parents and Peers who supported me throughout my project
 INDEX
SR. NO DESCRIPTION CHAPTER NO PAGE NO.
1 Introduction 01.
1.1 Meaning
1.2 Features/characteristics
1.3 Importance/Roles
1.4 Advantages/Benefits
1.5 Disadvantages
1.6 Pros and cons
2. Research Methodology 02.
2.1 Introduction
2.2 Objectives
2.3 Hypothesis
2.4 Scope of researchers
2.5 Significance of research
2.6 Selection of problem
2.7 Sample size
2.8 Sample design
2.9 Limitations
2.10 Data collection from source

3. Review of literature 03.

3.1 Introduction
3.2 Indian author review
3.3 Foreign author review
3.4 Gap of study
4. Company profile 04.
4.1 Introduction
4.2 History of company
5. Data analysis and 05.
interpretation.
6. Conclusion and Suggestions 06.
7. Reference
8. Appendix(questionnaire)
9. Bibliography
 CHAPTER 1 – INTRODUCTION
1.1-MEANING
Privatization is a concept that is hard to define because it encompasses a wide range of possibilities from
decentralization on the one hand to market discipline on the other (Kehinde, 2010). At a general level,
researchers have described privatization as a change in the institutional template, pointing out the differences
between the private sector and the public sector in terms of their environments, resources and management
practices (Johnson, Smith, & Codling, 2000).
The concept has also been defined as “the divestment of some government functions to private markets and
the application of private markets practices, ethos and goals in public administration and policy” (Argy, 2001,
p. 66). In essence, privatization is commonly suggested in situations where public enterprises are viewed as
inefficient (Boycko, Shleiferm & Vishny, 1996) and where the private sector is seen as sustainable and a more
efficient engine of growth for the economy (Kehinde, 2010).
Privatization may also result from the need to increase the “efficiency of the economy, reduce government
budgetary costs, broaden direct ownership of productive assets, and/or reduce and reorient the role of
government to concentrate on the provision of social and economic infrastructure” (Dzakpasu, 1999, p. 1).
Privatization has also been frequently recommended for developing countries, where the industrial sector and,
occasionally, key elements in the commercial sector, are heavily dominated by public enterprises. Loss-
making enterprises have, for many years, been a drain on government resources in these countries. Such
enterprises have required direct budgetary transfers or have relied on government-guaranteed borrowing to
finance their cash operating losses. Recently, the wider macroeconomic
Problems that have afflicted developing countries have forced them to reconsider their strategies for dealing
with public enterprises. In particular, many of the countries that have adopted Fund-supported adjustment
programs have been trying to address the problems that give rise to the need for financial support of public
enterprises, and privatization has, in a number of cases, been considered as a way of relieving governments of
their heavy involvement in industry and commerce
IMPLICATIONS OF ECONOMIC POLICIES AND DEVELOPMENT

The economic development in India followed socialist-inspired politicians for most of its independent
history, including state-ownership of many sectors; India's per capita income increased at only around 1%
annualized rate in the three decades after its independence. Since the mid-1980s, India has slowly opened up
its markets through economic liberalization. After more fundamental reforms since 1991 and their renewal in
the 2000s, India has progressed towards a free market economy.

In the late 2000s, India's growth reached 7.5%, which will double the average income in a decade. IMF says
that if India pushed more fundamental market reforms, it could sustain the rate and even reach the
government's 2011 target of 10%. States have large responsibilities over their economies. The average
annual growth rates (2007–12) for Gujarat (13.86%).

Uttarakhand (13.66%), Bihar (10.15%) or Jharkhand (9.85%) were higher than for West Bengal (6.24%),
Maharashtra (7.84%), Odisha (7.05%), Punjab (11.78%) or Assam (5.88%). India is the Fifth
largest economy in the world and the third largest by purchasing power parity adjusted exchange rates (PPP).
On per capita basis, it ranks 140th in the world or 129th by PPP.

The economic growth has been driven by the expansion of the services that have been growing consistently
faster than other sectors. It is argued that the pattern of Indian development has been a specific one and that
the country may be able to skip the intermediate industrialization-led phase in the transformation of its
economic structure. Serious concerns have been raised about the jobless nature of the economic growth.
Favorable macroeconomic performance has been a necessary but not sufficient condition for the significant
improvement in the human development indicators. Although the rate of poverty declined after economic
reforms of 1991, the improvement in human development has been less than satisfactory. For instance, child
malnutrition has continued to persist (46% in 2005–6).

The progress of economic changes in India is followed closely. The World Bank suggests that the most
important priorities are public sector reform, infrastructure, agricultural and rural development, removal of
labour regulations, reforms in lagging states, and HIV/AIDS. For 2018, India ranked 77th in Ease of Doing
Business Index. According to Index of Economic Freedom World Ranking an annual survey on economic
freedom of the nations, India ranks 123rd as compared with China and Russia which ranks 138th and 144th
respectively in 2014.
At the turn of the century India's GDP was at around US$480 billion. As economic reforms picked up pace,
India's GDP grew five-fold to reach US$2.2 trillion in 2015 (as per IMF estimates).

India's GDP growth during January–March period of 2015 was at 7.5% compared to China's 7%, making it
the fastest growing economy. During 2014–15, India's GDP growth recovered marginally to 7.3% from
6.9% in the previous fiscal. During 2014–15, India's services sector grew by 10.1%, manufacturing sector by
7.1% & agriculture by 0.2%. Indian Economy grew at 7.6 & 7.1 in FY 2015–16 and FY 2016–17
respectively as major reforms had taken place like Demonetization and implementation of GST in FY 2016–
17.
1.2 FEATURES ON PRIVATIZATION OF PIBLIC ENTERPRISES
 New Concept
Privatization is a new concept that has emerged in the last two decades.

 Universal Concept
The concept of privatization has emerged not only in India but it has developed all over the world.
Countries like USA, UK, Japan, India, etc. Has adopted this ideology.

 Wide Concept
It is a wise idea. It involves not only the transfer of the public sector to private hands but it limits
government involvement in the economic activities and protects the private sector.
Thus, it involves a large number of activities such as reduce government shares then the economic
sector the expansion of the private sector.

 Economic Democracy
It is a means of establishing economic democracy.
It provides the chance to the private sector to operate in economic activities freely.

 Process
Privatization is a process which goes on continuously.
It cannot be completed in a certain period. It is a process that takes its shape slowly.

 Private Sector in Place of Public Sector

The private sector is being developed in place of the public sector in the process of privatization.

 Reduction in State Dominance

It is a process in which state dominance is reduced in the economic sphere.

 Assumption
The privatization is based on the assumption that the private sector is more efficient in the
management and control of an enterprise than the public sector.

 New Strategy
It is a new strategy to face the challenges emerged in the economic sphere recently.
In the process of privatization, the private sector takes the task of economic development of the
country.

 Wide Area
Privatization is a wide concept.
It involves various activities such as denationalization, decontrol, deregulation, economic
Liberalization.

LIBERALIZATION, PRIVIZATION, GOLBALIZATION (LPG)

 Liberalization
The new economic policy has made provision for liberalizing the economy against unnecessary controls and
regulations. Here the liberalization simply indicates liberating the trade and industry from unwanted
restrictions. In order to liberalize the economy and to bring transparency in the policy, the New Industrial
Policy, 1991 has abolished the system of industrial licensing for all industrial undertaking, irrespective of the
 level of investment, except for a short list of 18 industries related to security and strategic concern, social
, hazardous chemicals and overriding environmental concerns and items of elitist consumption.

The New Industrial Policy has liberalized the industries in the following manner:

(i) All other industries, excepting 18 industries, are delicensed and allowed to set up and sell shares without
any restriction;
(ii) Industries are allowed to expand their capacity freely as per the needs of the market;
(iii) Producers are allowed to produce any commodity or diversify their output as per the demand in the

market;

(iv) MRTP companies (having investment beyond Rs. 100 crore) are now no longer required to go for pre-
entry of investment decisions and they are now allowed to expand their size;

(v) In 1996-97, the policy of industrial reforms has enhanced the investment ceilings in plant and machinery
for small scale industries (SSI) and ancillary units from Rs. 60 lakh and Rs. 75 lakhs respectively to Rs. 3

crore and that for the tiny sector has also been raised from Rs. 5 lakhs to Rs. 25 lakhs;

(vi) Industries have been set free to buy foreign exchange from open market and also to make
necessary imports. The aforesaid measures have liberalized the industries to take prompt
decisions so as to raise their efficiency in production and to face open competition in the
market.

 Privatization:

Another important feature of New Economic Policy is the promotion of the policy of privatization. Here the

word privatization means introduction of private ownership in publicly owned and managed enterprises and

also signifies introduction of private control and management in public sector enterprises. Under the policy

of economic reforms private sector has been allowed to play a major role in respect of economic activities.
The privatization programme of the economic reforms includes:
(i) Reducing the number of industries reserved for the public sector from 17 to 8;
(ii) Raising the share of private sector to total investment to 55 per cent at the end of Eighth Plan;
(iii) Selling the government equity holdings of public sector enterprises among the workers and public for

greater participation of private individuals;

(iv) Institutional credit support, to private sector enterprises from the national financial institutions. Thus this

privatisation move is expected to raise the efficiency and productivity of the private sector.
(v) Reducing the number of industries reserved for the public sector from 17 to 8;
(vi) Raising the share of private sector to total investment to 55 per cent at the end of Eighth Plan;
(vii) Selling the government equity holdings of public sector enterprises among the workers and public for

greater participation of private individuals;

(viii) Institutional credit support, to private sector enterprises from the national financial institutions. Thus this

privatisation move is expected to raise the efficiency and productivity of the private sector.

 Globalization of the Economy:

By the term globalization we mean opening up of the economy for world market by attaining international

competitiveness. Thus the globalization of the economy simply indicates interaction of the country relating

to production, trading and financial transactions with the developed industrialized countries of the world.
Globalization of the economy offers both challenges and opportunities to the developing countries. While

facing the trend of globalization, the developing countries are preparing themselves to face the challenge of
international competitiveness. With the introduction of new economic policy, Indian economy has accepted

the challenge of facing globalization of the economy.

Globalization of the Indian economy has made the following changes:

(i) The New Economic Policy (1991) has prepared a specified list of high technology and high investment

priority industries (Annexure III) in which automatic permission will be available for foreign direct

investment up to 51 per cent of foreign equity.

(ii) In respect of foreign technology agreements, automatic permission is provided in high priority industry

up to a sum of Rs. 1 crore. No permission is now required for hiring foreign technicians or for testing

indigenously developed technology abroad.

(iii) In order to make international adjustment of Indian currency, rupee was devalued in July 1991 by nearly

20 per cent which also stimulated exports, discouraged imports and raised the influx of foreign capital.

(iv) In order to make an inevitable move for the expeditious integration of Indian economy with that of the

world, the Union Budget 1992-93 has made Indian rupee partially convertible and then the rupee was made

fully convertible in 1993-94 budget. Accordingly, in March 1993, the Government introduced a fully unified
market determined exchange rate system.

Thus exchange, a major step towards current account convertibility was taken by India in March 1993 when
the foreign budget was abolished, the exchange rate was unified and transactions on trade account were

freed from exchange control. Capital account convertibility is now being targeted

(v) A new five-year export-import policy, 1992-97 was announced by the Government on March 31, 1992.

The main objectives of the new policy are to establish the framework of globalisation of India’s foreign

trade, to promote productivity, modernisation and competitiveness of Indian industry and thereby to enhance

its export capabilities and also to simplify and streamline the procedures governing exports and imports.

The policy removed all restrictions and controls on the external trade and market forces are allowed to play a

greater role in respect of exports and imports. Again on August 31, 2002, a new Foreign Trade Policy 2004-

09 was announced which has simplified the trade practices further for improving our competitiveness in the

global market.

(vi) In order to bring the Indian economy within the ambit of global competition, the government has

modified the customs duty to a considerable extent. Accordingly, the peak rate of customs duty has been

reduced from 250 per cent to 10.0 per cent in 2007-2008 budget.
(vii) In order to increase the flow of foreign investment and technology the Government has taken several

measures like:
(a) Granting foreign technical collaborations of high priority industries,
(b) Freedom to import foreign technology by private entrepreneurs and also to test indigenous technology

abroad,

(c) Establishing Foreign Investment Promotion Board (FIPB) for finalizing foreign investment and

collaboration proposals and

(d) Offering concessions to FERA/FEMA companies.
(viii) In order to meet the international competitiveness, the Government has taken various steps for

correcting its balance of payments deficit and also to increase the share of India in international trade.

Although India is possessing a large domestic market, broad based industrial and infrastructural sectors,

abundant supply of cheap labour, a huge number of educated and trained manpower and adequate natural

resources to attain competitiveness but the country remains far behind many other Asian countries like

Singapore, Malaysia, korea, Hong Kong, Indonesia, Taiwan and Thailand. India’s share in the world marker
as poor as 0.6 per cent.
In order to achieve success in the path of globalisation. Indian producers should improve their

competitiveness. This requires attainment of higher growth in productivity, improved quality products and
innovations in products and process technology. In order to attain international competitiveness, companies

will have to enter into strategic alliances and collaborations in order to bring in state-of-the-art technology

for reducing cost, improve efficiency and to penetrate and capture global markets with joint efforts.

In this respect, while showing the success of Japanese Companies Kenichi Ohmac observed, “The Japanese
competitive achievement provides hard evidence that a hallmark of successful strategy is the creation of

sustainable competitive advantage by beating the competition.” Therefore, the competitive spirit should

prevail upon Indian producers so as to earn a respectable place in world markets for various goods.

Under the present circumstances, a firm must take care to become competitive in an open global market to

face challenges and market opportunities. In this connection, Peter Drucker has rightly observed, “From now

on any country… but also any business especially a large one… that wants to prosper will have to accept

that it is the world economy that leads and that domestic economic and business policies will succeed only if

they strengthen, or at least trade partners as they have better competitive capacity than the poorer countries.”

In this connection Mr. George Soros observed that the benefit of globalisation are unevenly distributed.

Capital being more mobile, is in a better position to benefit than labour. Within capital, it is the international

portfolio investors who benefit the most as they have the greatest flexibility.

 New Public Sector Policy:

Another important feature of new economic policy is its change in public sector policy. The new policy has

shifted its emphasis from public to private sector.

The Industrial Policy has undertaken the following four major policy decisions in respect of public sector:

(i) Reduction in the list of industries reserved for the public sector from 17 to 8 and

introducing selectivecompetition in the reserved areas.

(ii) Disinvestment of shares in PSEs to raise resources and encourage wider participation of
general publicand workers in the ownership of PSEs.

(iii) Policy for sick PSEs be designed at par with that of the private sector. Sick PSEs which are

unlikely toturn around will be referred to BIFR for formulation of revival scheme.
 (iv) Improving performance through the performance contract or Memorandum of
Understanding (MOU)system by which Managements are to be granted greater autonomy and held
accountable for results.

 Modernisation:

The New Economic Policy has been providing high priority to the introduction of modern techniques in
production system. The policy facilitates the growth of sunrise industries, i.e. electronics and computers. In

order to introduce better and improved technology, the government is permitting all foreign collaboration

proposals related to the import of high technology.

The 1999-2000 Budget also made special provision of tax initiatives to facilitate corporate mergers and
collaborations to face the new challenges ahead. Private entrepreneurs are now free to finalise the terms of

such collaborations in their own term. Development of indigenous technology is also being encouraged.

Private companies are also encouraged to develop their own Research and Development (R&D) centres

through tax concessions.

Steps have also been taken for the modernisation of the age-old steel, textile, jute, sugar, leather industries

having rich potential. This is important for attaining self-reliance and also for cost reduction and the

production of high quality goods required for both internal consumption and exports. Steps have also been

taken for the revival and modernisation of sick industrial units established both under public and private

sectors.

 Financial Reforms:

As per the recommendations of the Narasimham Committee the Government has undertaken various

measures for the reform of the financial sector.

These include:

(i) Reduction in liquidity ratio,

(ii) Abolition of direct credit programmes,
(iii) Free determination of interest rates,
(iv) Necessary improvement in the banking accounting system,
(v) Making provision for Non-performing assets (NPAs),
(vi) Establishing speedy recovery of loans by special tribunals,
(vii) Reconstitution of banking system for the establishment of a few banks of international standard,

national banks, local banks, rural banks, private sector banks

(viii) Making provision for Non-performing assets (NPAs),
(ix) Establishing speedy recovery of loans by special tribunals,
(x) Reconstitution of banking system for the establishment of a few banks of international standard,

national banks, local banks, rural banks, private sector banks etc.,
(xi) Liberal treatment to foreign banks;
(xii) Abolition of branch licensing system,
(xiii) Giving more freedom to banks and ending dual control of RBI and Finance Ministry, and
(xiv) Reform of the financial institutions consisting financing companies, merchant banks, mutual funds

etc.and
(xv) Introducing capital market reforms.

 Fiscal Reforms:

Another important feature of New Economic Policy is to introduce fiscal policy reforms. The Government
initiated various fiscal measures in order to reduce the fiscal deficit from 8.4 per cent of GDP in 1990-91 to

5.0 per cent in 1996-97 and then to 4.4 per cent in 1999- 2000.

In order to achieve the target the Government has introduced various controls over public expenditure and

took initiative to raise its both tax and non-tax revenue. The other measures include imposition of fiscal

discipline by both Central and State Governments, reduction of subsidies, rationalisation of excise and

custom duties rate structure, constituting Expenditure Reforms Commission in 1999-2000 budget,

streamlining the working of State and Central public sector enterprises and withdrawal of budgetary support

to these enterprises, rationalization of tariff structure of SEBs and user charges of transport corporations,

irrigation projects etc.

1.3 IMPORTANCE ON PRIVATISATION OF PUBLIC ENTERPRISES.

Privatization has become an international phenomenon. Privatization is a process by which the

government transfers the production activity from Privatization has become an international
phenomenon. Privatization is a process by which the government transfers the production activity
from public sector to private sector. The importance of privatization is discussed below as follows:

Improvement in Efficiency: Privatization works for maximization of profit as against public sector.
Increasing competition forces private sector to work efficiently and for maximization of profit.

Proper utilization of resources: As compared to public sector, private sector very quickly accepts
and adopt the advanced technology and this helps to exploit natural resources in a better and
balanced manner.

Quick decision: Private organization takes quick decision as compared to public sector and this
benefits the organization.

Quick remedies: A private organization can very quickly take any type of decisions for solving any
problem and any adverse situation can be handled tactfully and quickly.

No political interference: Private sector does not depend on any government agency for taking any
sort of action or decision. Also it is not influenced by third class government policies like corruption,
etc.

Better services to customers: Success of private sector mainly depends upon consumer satisfaction
and hence private sector aims and works for consumer satisfaction.

Easy funding: Government can easily raise huge funds by selling its equities to private sector.

Easy to fix responsibility: In private sector in most of the cases authority and responsibility goes
together and the responsibility of every individual is clearly defined. This force individuals to
perform their duties efficiently. Competition forces private sector to work efficiently and for
maximization of profit.
 1.4 ADVANTAGES ON PRIVATIZATION OF PUBLIC ENTERPRISIES.

 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.

 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.

 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.

 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.

 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 distribution of gas and electricity.
1.3 DISADVANTAGES ON PRIVATIZATION OF PUBLIC ENTERPRISIES.

1.4
 Natural monopoly
A natural monopoly occurs when the most efficient number of firms in an industry is one. For example, tap
water has very significant fixed costs. Therefore there is no scope for having competition amongst 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.

 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 privatizing 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.
 Government loses out on potential dividends.
Many of the privatized companies in the UK are quite profitable. This means the government misses out on
their dividends, instead going to wealthy shareholders.
 Problem of regulating private monopolies.
Privatisation creates private monopolies, such as the water companies and rail companies. These need
regulating to prevent abuse of monopoly power. Therefore, there is still need for government regulation,
similar to under state ownership.
 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 has increased the
complexity of rail tickets.
 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
 Evaluation of privatisation
It depends on the industry in question. An industry like telecoms is a typical industry where the incentive of
profit can help increase efficiency. However, if you apply it to industries like health care or public transport
the profit motive is less important.
It depends on the quality of regulation. Is the market contestable and competitive? Creating a private
monopoly may harm consumer interests, but if the market is highly competitive, there is greater scope for
efficiency savings.
1.5 PROS AND CONS

 PROS

 Private companies often operates more efficiently than public companies

 Acceleration of technological progress

 Less bureaucratic work style

 May attract more highly- qualified people

 Higher wages

 Product quality may improve

 Service quality may get better

 Supervision may be easier

 Lower product prices

 Lower influence lobbyists

 Additional source of income for government

 CONS

 Privatization may not be suitable for important infrastructure

 Energy supply may get threatened

 Access to medical equipment’s may no longer be guaranteed

 Education level may become lower

 Harmful if the business has a monopolistic character

 May not be feasible due to regulatory restriction

 Public companies may be sold too cheap to private co-operation

 Onetime payment instead of multiple dividend payments for governments

 Insufficient regulation

 Responsibilities may become unclear

 Fragmentations of public infrastructure may lead to serious problems

 Public vs. private interest

 CHAPTER 2 –RESEARCH METHODOLOGY

2.1 INTRODUCTION

Research may be very broadly defined as systematic gathering of data and information and its analysis for
advancement of knowledge in any subject. Research attempts to find answer intellectual and practical
questions through application of systematic methods. Webster’s Collegiate Dictionary defines\research as
"studious inquiry or examination; esp.: investigation or experimentation aimed at the discovery and
interpretation of facts, revision of accepted theories or laws in the light of new facts, or practical application
of such new or revised theories or laws". Some people consider research as a movement, a movement from
the known to the unknown. It is actually a voyage of discovery. We all possess the vital instinct of
inquisitiveness for, when the unknown confronts us, we wonder and our inquisitiveness makes us probe and
attain full and fuller understanding of the unknown. This inquisitiveness is the mother of all knowledge and
the method, which man employs for obtaining the knowledge of whatever the unknown, can be termed as
research. Research is an academic activity and as such the term should be used in a technical sense.
According to Clifford Woody research comprises defining and redefining problems, formulating hypothesis
or suggested solutions; collecting, organizing and evaluating data; making deductions and reaching
conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating
hypothesis. D. Steiner and M. Stephenson in the Encyclopaedia of Social Sciences define research as “the
manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify
knowledge, whether that knowledge aids in construction of theory or in the practice of an art.” Research is,
thus, an original contribution to the existing stock of knowledge making for its advancement. It is the pursuit
of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge
through objective and systematic method of finding solution to a problem is research. The systematic
approach concerning generalization and the formulation of a theory is also research. As such the term
‘research’ refers to the systematic method consisting of enunciating the problem, formulating a hypothesis,
collecting the facts or data, analysing the facts and reaching certain conclusions either in the form of
solutions(s) towards the concerned problem or in certain generalizations for some theoretical formulation.
At times, the first step determines the nature of the last step to be undertaken. If subsequent procedures have
not been taken into account in the early stages, serious difficulties may arise which may even prevent the
completion of the study. One should remember that the various steps involved in a research process are not
mutually exclusive; nor are they separate and distinct. They do not necessarily follow each other in any
specific order and the researcher has to be constantly anticipating at each step in the research process the
requirements of the subsequent steps. However, the following order concerning various steps provides a
useful procedural guideline regarding the research process:
1. Formulating the research problem;
2. Extensive literature survey;
3. Developing the hypothesis;
  Definitions of Research:

The following are the important definitions of research:

I. “Research is an endeavour / attempt to discover, develop and verify

Knowledge. It is an intellectual process that has developed over

Hundreds of years ever changing in purpose and form and always

Researching to truth.”
J. Francis Rummel

 Purpose of Research:

The purpose of research is to discover answers to questions through the application of scientific
procedure. The main aim of research is to find out the truth which is hidden and which has not been
discovered as yet. Though each research study has its own specific purpose, some general objectives
of research below .To gain familiarity with a phenomenon or to achieve new insights into it. (Studies
with this object in view are termed as exploratory or formative research studies).

2.2 OBJECTIVES
 To study the impact of privatization on economic policy and development
 To analyses the data of public enterprises under privatization
 To gain familiarity with a phenomenon or to achieve new insights, under privatization of
economic policy and development.

HYPOTHESES.

 Regarding the contemporaneous impact of privatization proceeds transferred to the budget,
There are plausible economic and political arguments supporting both the saving and spending
Hypotheses.

 Viewing privatization as a portfolio decision suggests that it is unlikely to have a

Direct impact on the deficit or other fiscal variables. Privatization proceeds transferred to the
Budget would simply be converted to another financial asset, and, provided that government
Net worth is unchanged, there would be no change in the overall balance.

 Pragmatic considerations also suggest that proceeds could be saved, for example if the timing or
magnitude is either uncertain or unknown, the proceeds could be saved until the subsequent budget
can allocate them.

 As for the spending hypothesis, a liquidity constrained government could find it optimal to use
privatization to finance a larger deficit.
 2.4 SCOPE OF RESEARCHER
The study is based on secondary data selected variables sourced from the Researcgate.com
As per the researchgate .com to emerge wide public enterprises on the economic policies and development
resources under privatization to create environment for rapid privatization
It involves not only the transfer of public sector to private hands but it limits government involvement into
the economic policies activities and development, protects the privatization.
Thus, it involves large numbers of activity including government policies and development under
privatization and this leads to expansion of private sectors

2.5 SIGNIFICANCE OF RESEARCH

 Governments take privatization stance to reduce its burden in terms of underutilization of resources,
over and redundant employment, fiscal burden, financial crises, heavy losses and subsidies in
order to improve and strengthen competition, public finances, funding to infrastructure, and
quality and quantity.

 Not only does public research address important social problems, such as health, environment and
security, but many of tomorrow's innovations will stem from fundamental research efforts of today,
as present innovative businesses are built on discoveries that arose in the public research sector,
suchas the laser.

 Not only does public research address important social problems, such as health, environment and
security, but many of tomorrow's innovations will stem from fundamental research efforts of today,
as present innovative businesses are built on discoveries that arose in the public research sector,
suchas the laser. 

 Much empirical and theoretical work emphasizes that research and development (R&D) is
an important contributor to economic growth. Research and development spending is likely to lead
to growth through its positive effect on innovation and total factor productivity (TFP)

 The role of research in several fields of applied economics, whether related to business or to the
economy as a whole, has greatly increased in modern times. The increasingly complex nature of
business and government has focused attention on the use of research in solving operational
problems. Research, as an aid to economic policy, has gained added importance, both for
government and business.

2.6 SELECTION OF PROBLEM
The desire to involve the private sector in the management and provision of port infrastructure and services
is prompted by the recognition that government regulations and processes are not always conducive to
efficient operations of commercial activities and by recognition of the private sector's relative strength in this
field. Also, in recognizing that investment sources outside government must be tapped in the provision of such
infrastructure and services involvement of the private sector provides the opportunity to share risks and, in
times of rapidly changing economic environment to respond quickly to market/demands and opportunities.
The principal strengths of the private sector 8.
 A much stronger management capability due to its ability to recruit and compensate qualified managers
and technicians

 Relative freedom to operate outside of political and bureaucratic constraints (e.g. in procurement and
the working of overtime

 Better company specific labour management.

 Potentially greater experience in developing facilities and providing services

Attuned to the competitive world of global trade;

 Access to non-traditional resources for investment in the infrastructure to serve

Trade which some individual governments may lack.

 These attributes of the private sector enable it to respond rapidly to market changes
Through speedy decision making and investment.

 PRIVATIZATION ISSUES

This section addresses the issues, and the decisions which governments themselves must make prior
to embarking upon a privatization process. They may vary from project to project. The initial
groundwork and clarification of objectives recommended herein should enable governmental
sponsors of ports privatization to chart their course with greater clarity. This in turn should lead to a
smoother, faster internal process. It should also attract a greater number of interested, qualified and
eligible investors/operators; thereby, providing government with the widest range of choice and the
best opportunity of achieving objectives.

 Improve efficiency and productivity of operations

 One of the foremost if not the primary reason for involving the private sector in the operation and
management of ports is to increase efficiency. It is generally considered that a profit oriented investor
operating in a competitive environment will strive to minimise costs and improve services. These are
necessary measures if the operator is to retain and expand the clientele whilst earning a satisfactoryreturn on
investment. With this in mind some governments have turned to the private sector to exploit the functioning of
this market discipline in their ports.

 The Government's objective is not to achieve profits for the private investor per se. Rather the goal is
to improve efficiency and thereby reap the benefits of lower cost and improved services for importers
and exporters. Enhanced transport performance also makes a nation more attractive for new investors
that will be major consumers of transport 'services, for example, foreign and domestic industrialists.
 Reduce the financial and administrative burden on the public sector

 Public management of a port or a system of ports on a day-to-day basis generates a

considerable demand on governmental resources in terms of time and personnel for what is
largely a commercial enterprise. Whilst this resource demand falls most heavily on directly
concerned ministries and agencies (e.g., Transport) it canbe. Shown that it frequently spills
over to those peripherally involved (e.g., Treasury) organization and even to the Cabinet
itself.

 In the process of re-engineering the functions they undertake some governments have
adopted privatization, at least in part, for the ports sector. Whilst professionals in government
will continue to be required to manage the residual responsibilities that the government
chooses to retain, they will only be a fraction of those that were on the public roster when it
played the combined roles of owner, manager, operator and regulator. The argument can be
made in many countries, however, that there need not be an overall diminution of
employment in the sector as increased efficiencies and enhanced performance can lead to
greater competitiveness resulting in growing throughput and resultant demand for staff.

 Transferring activities to the private sector puts them into the business realm where only
those positions which are required to undertake the successful and profitable commercial
mission of the port, are retained. Thus, not only will there be a substantial reduction in
governmental personnel focussed on the port, but also a reduction in the total number of
managers and labour involved per fixed amount of traffic handled.

 Generate maximum revenue and reduce investment

 A valid reason for the privatization of ports can be to generate increased revenue for the
government. This can be achieved through improvements in efficiency and reductions in
costs which can be translated into profit sharing possibilities. Importantly, government can
also reduce its risk in terms of revenue expectation by divorcing lease payments from the
amount of cargo throughput; however, this would be at the cost of forgoing increased income
from expanded 8traffic levels. If this is the principal objective it is important that it be
acknowledged as its successful attainment will be determined by the approach adopted.

 Social objective
 A number of governments, including Malaysia, have adopted privatization in part as a tool of
broader social policies aimed at redistributing wealth or moving marginal communities
closer to the middle of the economic mainstream. The aims of such policies cannot be
faulted, but where they are to be applied they should be clearly enunciated.

 Privatization decisions based on social objectives will have direct implications as to the
implementation approach ultimately adopted. As with all privatization objectives,
approach should be devised not only with the social target in mind but should ensure that the
preferred role of the port is also achieved.
 Promote private sector involvement in the economy

 Some Asian economies have been primarily driven for several decades by
governmental spending. The Government's role has been pervasive resulting in a
large bureaucracy. Even industrial activities, transport, distribution and retailing
have-been carried out, at least in part, by public sector enterprises, which has directly
inhibited private sector investment and large segments of the private sector may have
atrophied. . To redress this situation, one motive announced by some governments
for privatizations to increase opportunities for private investors, either directly or
through share purchases. The intent is to create enhanced entrepreneurial activity
with anticipated multiplier effects throughout the economy.

 Attract new or additional business and trade

 On some occasions private project sponsors are solicited who are already involved in
trade or transport services (e.g., shipping lines). The rationale is that if a port user
such as a shipping line which controls a significant amount of cargo becomes an
investor, it can be expected that much of the investor's traffic, which may be
discretionary in its routing, will be funnelled through the port.
 If this motivation applies to a particular privatization programme, care should be
taken in the formulation of any pre-qualification of bidders and in actual contract
negotiation. For example, some shipping lines have a separate stevedoring or
terminal management subsidiaries so that arrangements with the port operating group
will not necessarily ensure capture of the parent company's business. Obviously,
actual investment by the group is more likely to generate focus on a particular port
than will a simple management contract.
 Risk sharing
 Within any approach to involving the private sector in the financing and operation of
ports and related activities, an additional important element is the sharing of risk.
Clearly it is important to define the objectives of the programme of
commercialization/privatization as it will serve as a measure of risk. While this is
dealt with in a later section related to the protection of the investor/operator, it can be
an important reason for governments to consider involving the private sector as a
means of reducing exposure to economic, technological and management risk.

 The consequential objectives arising out of these long-term policy aims may include
a number of the following:

I. Promoting private sector involvement in the development of port

infrastructure or provision of services;

II. Reducing the need for government investments in the sector;

III. Upgrading the professional skills of port managers, staff and

workers;

IV. Creating competitiveness in the provision of port services and

operations;
 V. Reducing/eliminating surplus dock workers and restrictive labour
practices;

VI. Spreading the ownership of the ports (affirmative action); and

Attracting

VII. Foreign investment and importing foreign expertise.

2.7 SAMPLE SIZE

The sample size consists of 100 units out of which most logical and non-biases
Response are selected thus the sample size is taken out to be 100 units.

2.8 SAMPLE DESIGN

Data has been presented with the help of bar graph, pie chat, line graph, google form etc.

2.9 LIMITATIONS

 Time limitations
 Some of people were not so responsive.
 Possibility of error in data collection.
 Possibility of error in analysing data due to small sample size.
 It is possible that the information supplied by the informants may be
Incorrect, so the study may lack accuracy

2.10 DATA COLLECTION FROM SOURCE

Data collection means collecting of data from different source research is totally based on primary data
Secondary data can be used only for the reference. Research Hs been done secondary data collection, and
primary data has been collected by interacting with various people (Google form) secondary data has being
collected through various journal and websites.
I. Primary Data:
Primary data constitute first-hand information which is collected for the first time in order to solve
research problem. It is data collected from primary source which are original source. It collected
from information on certain aspect of research report.
Primary data required for the study was collected from maximum 30 active individual respondents.
Data was collected by way of survey method(questionnaires form) and respondent from different
age group, experience level.

II. Secondary Data

Secondary data is easily available on internet, census report and other report. Secondary data is
collected by primary data. Reports are basically it is secondary hand data.
The researcher collected secondary data for the study from books, journals, newspaper, websites etc.
 CHAPTER NO 3 LITREATURE REVIEW
3.1 INTRODUCTION
A literature review surveys books, scholarly articles, and any other sources relevant to a particular issue, area
of research, or theory, and by so doing, provides a description, summary, and critical evaluation of these
works in relation to the research problem being investigated. Literature reviews are designed to provide an
overview of sources you have explored while researching a particular topic and to demonstrate to your
readers how your research fits within a larger field of study.

 IMPORTANCE OF LITERATURE

A literature review may consist of simply a summary of key sources, but in the social sciences, a literature
review usually has an organizational pattern and combines both summary and synthesis, often within specific
conceptual categories. A summary is a recap of the important information of the source, but a synthesis is
a re-organization, or a reshuffling, of that information in a way that informs how youare planning to
investigate a research problem. The analytical features of a literature review might:

 Give a new interpretation of old material or combine new with old interpretations,
 Trace the intellectual progression of the field, including major debates,
 Depending on the situation, evaluate the sources and advise the reader on the most pertinent or
relevant research, or
 Usually in the conclusion of a literature review, identify where gaps exist in how a problem has been
researched to date.
The purpose of a literature review is to:
 Place each work in the context of its contribution to understanding the research problem being
studied.
 Describe the relationship of each work to the others under consideration.
 Identify new ways to interpret prior research.
 Reveal any gaps that exist in the literature.
 Resolve conflicts amongst seemingly contradictory previous studies.
 Identify areas of prior scholarship to prevent duplication of effort.
 Point the way in fulfilling a need for additional research.
 Locate your own research within the context of existing literature [very important].

 TYPE OF REVIEW
It is important to think of knowledge in a given field as consisting of three layers. First, there are the primary
studies that researchers conduct and publish. Second are the reviews of those studies that summarize and
offer new interpretations built from and often extending beyond the primary studies. Third, there are the
perceptions, conclusions, opinion, and interpretations that are shared informally that become part of the lore
of field.

In composing a literature review, it is important to note that it is often this third layer of knowledge that
is cited as "true" even though it often has only a loose relationship to the primary studies and secondary
literature reviews. Given this, while literature reviews are designed to provide an overview and synthesis
of pertinent sources you have explored, there are a number of approaches you could adopt depending upon
the type of analysis underpinning your study.


 3.2 INDIAN AUTHOR REVIEW

(NANTIYA WATTAYA) (WEERASAK PUTTHASRI)

In January 2004, a high level forum on the Health Millennium Development Goals (MDGs) reported that
there was a need to urgently address the current human resources for health crisis [1]. In response to this
crisis, the World Health Organization (WHO) has identified a minimum target threshold for combined
doctor, nurse and midwife density of 2.28 per 1000 of the population; below this a health workforce is
unlikely to be able to provide sufficient coverage for essential interventions [1]. Fifty-seven countries,
mostly in sub-Saharan Africa but also a number of Asian countries, were identified as falling below this
threshold. In these countries, nurses are recognized as a key component of health care systems fulfilling a
wide range of roles, especially where there is a shortage of other health workers [3]. This is particularly the
case in primary healthcare.

Besides this, nurses are responsive to an increased demand for health services caused by changing
demographic, economic, and epidemio logical factors. Effective functioning health systems are thus difficult to
achieve if nurses remain scarce. In 2006 the WHO suggested that national governments must anticipate a
growing role for the private sector in reducing this problem by increasing the production of nurses. It is clear
that nurses will continue to be a key part of health systems but there is a lack of evidence examining the ways
in which governments have managed the opening of markets to the private sector, and the contributionthat the
private production of nurses is making to wider health systems. This study seeks to examine the supply of, and
demand for, private nurse production and the policy environments in which nursing production institutions are
operating.

It then proceeds to discuss the contributions that private education institutions make to meet health workforce
challenges and the risks and opportunities that accompany private involvement in nurse production. This
review was developed as part of the Resilient and Responsive Health Systems (RESYST) project. RESYST
conducts collaborative research on health systems, including on the theme of HRH. Partners working on this
theme are the African Medical and Research Foundation, Kenya (AMREF), the International Health Policy
Programme, Thailand (IHPP), the Indian Institute of Technology Madras (IITM) and the University Of
Witwatersrand, South Africa.

Consequently, India, Kenya, South Africa and Thailand are the four countries that are the focus of this
research. The four countries studied represent a broad-ranging demographic, economic and health status.
More information on the basic indicators of these four countries is presented in Additional file 1.

A scoping systematic review was conducted to reduce bias and the element of chance. A roundtable
discussion amongst researchers was convened to develop the conceptual framework, identify key research
questions and determine the subject of the review. Once the information for the research questions was
adequately retrieved, all researchers convened another roundtable meeting to analyse the extent of the
contribution that private nurse production makes to health systems, and synthesize the knowledge and
policyrecommendations of this study. Figure 1 provides the framework of the review in line with a
number of questions/themes:

1) Demand for nurses, under privatization.

2) Nursing supply for development.
3) Economic Policy and Environment of private nurse production.
 Demand for nurses: what was the demand for nurses and its trend in the past decade? How was this affected
by changing health needs caused by demographic, epidemiological, and socio-economic changes in the four
countries studied, or international demand for nurses from the said countries? Nursing supply: what was the
supply of nurses and its trend over the past decade? What is the extent of nursing supply by the private
sector? Supply was defined as the number of nurses overall (stock of nurses), the actual number of nurses
produced in the private sector, and the total production capacity of private nurse education institutions, for
example, number of schools, or number of teaching staff, regardless of whether or not this capacity is fully
utilized. Policy environment of private nurse production: what, and how, were the policy contexts affecting
private nurse production? These included policies to ensure the quality of private nurse graduates, the
accreditation of nurse training quality, and the promotion of public-private partnerships in nurse education.

The selection of these issues came from brainstorming among the authors, along with consultation with
senior officers in the Thailand Ministry of Public Health (MoPH). Selected articles were collated and
appraised with regards to the above questions. All articles were retrieved electronically by one, or other, of
two parallel approaches: first, searches from the following electronic literature databases, namely, PubMed,
Science Direct Journal of Professional Nursing, Google Scholar, BioMed Central (BMC) Human Resources
for Health journal, BMC Medical Education journal, and BMC Nursing’ journal; second, purposive searches
from the websites of HRH related organizations and networks such as, the Ministry of Health (MoH), WHO,
Global Health Workforce Alliance (GHWA), World Bank (WB), International Council of Nurses (ICN), the
Asia Pacific Action Alliance on Human Resources for Health (AAAH). The list of key words applied in
Google Scholar, BMC and Science Direct was: nurses, ‘private’, ‘production’, ‘supply’, ‘demand’,
‘employment’, ‘responsiveness’, ‘migration’, ‘quality’ and ‘equity’. The keywords used in PubMed
corresponded to, but were modified from, those applied in other search engines in order to fit the medical
subject headings (Mesh) terms.

They were ‘Nurses’, ‘Private Sector’, ‘Supply and Distribution’, ‘Health Services Needs and Demand’,
‘Employment’ and ‘Emigration and Immigration’. Due to time and resource constraints, keywords beyond
these MeSH terms were not applied. This resulted in a pool of 657448 references. Since this study focuses
primarily on the four RESYST countries, namely, India, Kenya, South Africa and Thailand, these countries’
names were also applied in every search engine in accordance with the Boolean search strategy (‘India’ OR
“Kenya” OR “South Africa” OR “Thailand”). To focus the search, the Boolean search strategy was further
utilized. The word “Nurses” was combined with “(“India” OR “Kenya” OR “South Africa” OR “Thailand”)”
and one of the other key terms, either “private”, “production”, “supply”, “demand”, etcetera. Language
limitations were also imposed: only articles published in English were retrieved. Other limitations were,
‘human not animal’ and ‘published between January, 1st, 2002 and December, 31st, 2011’. Most articles
were retrieved from PubMed and Google Scholar. After combing key terms from the search strategy, 463
potentially relevant articles were selected. Duplicate data were excluded, which left a total of 206 articles for
further review. The software EndNote Version X4 was used to store and track the search results from
electronic literature databases in a computerized and retrievable format.

Once the articles were retrieved, they were entered into the selection process. The first stage of the selection
process saw all article abstracts and titles assessed by two reviewers (JR and RS). Only 19 articles relevant
to the above conceptual frame work and with fully accessible texts underwent the second stage of the
selection process. The separate purposive search from pertinent agency websites yielded 56 articles. Of
these, four were excluded
On the basis of duplication. After being reviewed by two independent reviewers, 52 articles were considered
potentially relevant; full articles were retrieved, read and discussed by two reviewers (JR and RS): at this
stage only 27 articles matching with the research questions were identified. Combined with the 19 articles
retrieved from the systematic search, this resulted in a total of 46 papers for assessment in the roundtable
discussion with all authors. The result of this discussion saw 23 papers excluded, leaving a total of 23
articles. The flow of the article selection process is summarized in Figure 2, and Table 1 provides detailed
results of the systematic search. Findings Contents of the final 23 articles were mapped with the research
questions: demand for nurses, supply of nurses (stock of nurses, number of nurses produced in the private
sector, and production capacity of private nurse institutions), and policy environment of private nurse
production, see Table 2 below.

Demand for nurses the studies examined show that the factors affecting the demand for nurses are complex
and can be divided into two main categories, namely, changing healthcare system policies, and wider
societal factors. Changing healthcare systemic policies which have increased the demand for nurses in all
four chosen countries have included the introduction of new financing or insurance systems, and the
introduction of universal healthcare coverage (UHC) in some countries. Other policy issues have included
the realignment of healthcare systems towards a focus on primary healthcare, and acceleration to achieve the
health MDGs. In Thailand there has also been the additional issue of the expansion of private provision of
healthcare with the introduction of policies promoting Thailand as a medical hub . Wider societal factors at
both the domestic and global levels, have also led to an increasing demand for nurses in all four chosen
countries: these have included ageing populations and increased prevalence of non-communicable chronic
diseases (NCD) , the spread of new and re-emerging diseases , increased public demand for healthcare
services, and socio-economic fluctuations .

There are also numerous cases of a mismatch of demand and supply leading to localized shortages,
especially in rural or hardship areas. As well as domestic demand these factors result in changing global
demand for nurses, causing international migration. This is a particular problem for Kenya and India where
nursing supply is still in crisis.

Nursing supply Table 3 displays the density of nurses (the ratios of nurses to 1000 in the population) in the
four selected countries, between 2000 and 2010. In South Africa, nurse density was 4.08 per 1000;
meanwhile, Kenya had a significantly lower density of 1.18 nurses per 1000. This level was only marginally
exceeded by India, which had a density of 1.30 nurses to 1000 and likewise, Thailand, which had a density
of 1.52 nurses to 1000. While the overall density of nurses was significantly higher than in the other three
countries, South Africa still suffered from the misdistribution of nurses, shortages in under-served and rural
areas, and still had insufficient nurses to meet public health needs. Misdistribution was also a significant
problem in Thailand where the density of Thai nurses working in the capital Bangkok was more than five
times higher than that of the rest of the country.
Number of nurses produced in private sector In 2004 South Africa produced 35266 enrolled nurses, who had
completed a two-year training programme. The number of enrolled nurses produced by the private sector has
rapidly overtaken the number produced by the public sector. In 2001 the private sector produced 45.2% of
enrolled nurses, but by 2004 this had increased to 66.3%. This is not the same in other cadres; in 2004 South
Africa had 98,490 professional nurses who completed a four-year degree-level qualification. The literature
review provided no evidence of private sector involvement in production of this cadre in South Africa.
Conclusion:
It should be noted that changes in the labour market, regulatory environment and the demand for nursing
personnel at domestic and international levels significantly determine the direction and the operation of
private nursing education institutions. While the private sector can provide flexibility in production,
governments should ensure that nursing graduates from public and private education institutions are of
sufficient quality and meet the health needs of their populations.

This can be achieved through effective standardized accreditation and licensing systems. Countries that are
experiencing nursing shortages, while seeking to encourage increased private production of nurses, should
also make meeting domestic need the first concern, before then considering serving the international market.
There is an evident need for further primary research to ascertain the exact nature of the contribution of the
private sector to nurse production, and to examine the variance in the quality of nurses produced.

 PRIVATIZATION IS NOT ONLY HELPFUL FOR PUBLIC ENTERPRISES BUT ALSO IT

IS APPPLICABLE FOR HEALTHCARE INDUSTRY.
 3.3 FOREIGN AUTHOR REVIEW
Article History Received:
18 January 2019 Revised:
28 February 2019 Accepted:
April 2019
Published: 11 April 2019 Keywords Privatisation Economic reform Developed countries Developing
countries Corporate governance State owned enterprises (SOE‟s) Agent-principal theory Restructuring

1. ABSTRACT
This paper aims to present a general overview of the literature relating to privatisation as a worldwide
economic phenomenon. It starts by describing the origins, definitions and the rationale for privatisation. The
spread of the privatisation phenomenon throughout the world is also discussed. The study then provides
justification for privatisation in less developed countries (LDCs). It also summarizes privatisation objectives,
the sequencing and pace of privatisation, factors influencing privatisation and the agent principal theory. The
study then outlines the different privatisation methods and briefly refers to efficiency and effectiveness in the
context of privatisation, privatisation and changes in corporate governance as well as arguments on
privatisation. A discussion into the role of international agencies in the privatisation process is also provided
and summarizes the main lessons drawn from privatisation. Previous research including empirical studies
comparing the performance of government owned companies, empirical studies in developed countries (non-
transition economies), and in developing countries (transition economies) as well as empirical studies
comparing pre and post privatisation performance changes are comprehensively discussed.
Privatisation is not one clear and absolute economic proposition (see for example (Beesley and Little child,
1983; Park, 1997; Wright, 2002; Dawar and Ndlovu, 2017)). It means different things in different parts of
the world, where both the fundamentals of the economy and the purpose served by privatisation may differ.
Hence, it covers a wide range of activities, all of which imply a transfer of the provision of goods and
services away from the public sector. For instance, privatisation is a somewhat new word. It made no
significant emergence in political or economic literature before 1979. The word itself did not appear in the
British Conservative Party’s election manifesto of that year. However, it rapidly became one of the most
significant policies of the 1980s, spreading outward from the UK to influence more than a 100 countries
worldwide.
However, the term “privatisation” is widely believed to have first been used by Mr. John Diebold, an
American policy maker, who used this term during his campaign to transfer a government owned service
from the public sector to the private sector in the USA (Lord, 1987). According to the Economist magazine
the term “privatisation” appeared in print for the first time in the Economist in the early 1970s. Privatisation
can be considered as an umbrella term which can be used to denote a scale of policy initiatives in different
countries with different modes and motives. The word “privatize” itself can be taken to mean the opposite of
nationalize, i.e. as the transfer of ownership of state enterprises to the private sector.
Privatisation can also be defined in simple terms such as “the process by which governments sell their state
owned enterprises (SOEs), completely or in blocks of shares, to private investors, local and foreign”
Megginson and Netter (2001) document that privatisation as a political, social and economic policy can be
taken to mean “the deliberate sale by a government of state-owned enterprises (SOEs) or assets to private
economic agents”.
Overall, from the above definitions, privatisation can be described as a political, social and economic
process, which leads to change in ownership structure of the enterprise from the state to the private sector. In
addition, privatisation encourages the private sector to play a vital role alongside the public sector in
reducing the level of government intervention in terms of planning, regulation and subsides.
2. THE SPREAD OF THE PRIVATISATION PHENOMENON THROUGHOUT THE WORLD

Over the last four decades, there has been a widespread change of opinion regarding the role of state and
private enterprises in promoting economic growth. Despite the fact that SOEs are the most common
exampleof privatization, it must be noted that governments can also privatize land, housing (which has been
done in the UK) and even services and utilities such as banking, insurance, education, road construction,
maintenance, water, electricity and other services that have been privatized in different countries by
contracting out to private companies.

More important than understanding privatization itself as a process is understanding its underlying rationale
that there are limits to what governments can provide and that some economic undertakings, especially
industrial companies, are tackled more efficiently by the private sector. . It was mentioned earlier that it was
the UK that pioneered privatization. It was the UK also which in many cases pioneered the growth of the
state sector among private enterprise economies. It was undoubtedly British teaching which inspired many
countries of her previous empire to follow the course of public sector economics and centralized planning. It
is hard to find a country that has not experienced privatization of some kind or another. While the
privatization trend, historically, is usually associated with the UK, the first “denationalization” programme
occurred in the Federal Republic of Germany (FRG) in 1957, during the post war government of Konrad
Adenauer.

The first major sale occurred in 1961, when the FRG sold a majority stake in Volkswagen in a public share
issue, and four years later orchestrated a similar secondary share issue for VEBA. These two issues
increased the number of shareholders in Germany from approximately 500,000 to almost 3,000,000
(Megginson et al., 1994). After the UK, many different countries adopted privatization programmes.
Megginson et al. (1994) document divesting share issues by Denmark, Italy, Chile, Malaysia, and Singapore
in 1985. The next major country to adopt privatisation was France, which marked a sharp break with the
country’s dirigiste tradition of state intervention. In addition, Austria, Belgium, Holland, Jamaica, Japan,
Spain, Sweden, and the United State all implemented significant privatization programmer through share
issues during 1986 and 1987 (Megginson et al., 1994)

After 1987, privatizaton programmes spread rapidly around the world, especially to developing countries in
South America, Africa, and South Asia. Although most of these programmes depended heavily on private
sales, the authors document significant share issues in Bangladesh, Brazil, Chile, Gambia, Malaysia,
Mexico, Nigeria, Sierra Leone, Singapore, and Venezuela.
Since then, privatisation has developed largely as a robust economic policy tool to the extent that more than
a hundred national governments have adopted at one degree or another. Indeed the relative universality and
popularity of adopting privatization programmes is because of the fact that privatisation can not only
improve governments‟ performance but also generate vast amounts of revenue for governments without
having to increase taxes or cut spending programmes (Levine, 1997; Boutchkova and Megginson, 2000).

According to Boubakri and Cosset (1998) “privatisation has turned into a major worldwide phenomenon, in
both developed and developing countries. Over the last decade, privatisation of SOEs has been occurring at
an increasing rate, especially in developing countries. The share of these in global privatisation revenues has
risen from 17 per cent in 1990 to 22 per cent in 1996” and is expected to exceed 40 per cent by 2020 (Ismail,
2018).
PRIVATISATION IN LESS DEVELOPED COUNTRIES (LDCS)
Privatisation with economic, political and social objectives and strategies is a relatively new experience for
the developing countries of the world. Essentially, privatisation is a response to the domestic, economic and
political situations of these countries. In fact privatisation has been prescribed as a method for improving the
operating efficiency and thus profitability of public enterprises (PEs).

“Although it is often claimed that the privatized company will achieve a higher return on capital invested
and will accelerate economic performance, their generally poor profit performance or discounted cash flow
and heavy debts have raised many doubts about their economic efficiency in generating surplus capital for
developing countries” (Cowan, 1983).

It has even been suggested that in some developing countries, public enterprises have become a vehicle of
corruption, nepotism, misappropriation of public funds and indeed an instrument for furthering the political
and material interests of ruling parties. Nevertheless, these views are generally applicable only where public
enterprises experience a high degree of political bureaucratic interference in commercial decision making.
Reviewing the literature in this context has revealed that public enterprises have not been able to accomplish
their objectives particularly well in developing countries. Accordingly, the privatisation process in
developing countries could be justified in order to overcome the above mentioned problems.
PRIVATISATION OBJECTIVES
The literature review shows that privatisation objectives are broadly similar across countries in that they
concentrate on achieving benefits from re-balancing the roles of the private and public sector to enhance the
productive power of the economy. Hence, the major objective of privatisation is to develop the private sector
and introduce regulatory reform in the public sector in order to improve efficiency, generate revenue or
profits, create employment opportunities, improve the quality of services and develop capital markets.
The specific reasons behind privatisation at a national level are varied and inter-linked. The objectives can
be political, economic, fiscal, social or, most frequently, a combination of several of them. Among the
reasons behind privatisation, as documented by UNCTAD (1995), Vickers and Yarrow (1993), Liebreman
(1993) and Estrin and Pelletier (2018) are the following:
1. To promote economic efficiency by fostering well-functioning markets andcompetition.
2. To redefine the role of the state in order to allow it to concentrate on the essential taskof governing.
3. To reduce government involvement in enterprise decision-making.
4. To promote the development of capital markets.
5. To encourage employee share ownership.
6. To reduce the fiscal burden of loss-making public enterprises, in order to help regain fiscal control and
macroeconomic stability.
7. To reduce public debt and public sector borrowing requirement (PSBR).
8. To release limited state resources for the financing of other demands.
9. To generate new investment, including foreign investment, for instance in the area of education
10. To mobilize domestic resources for development and deepen domestic financial development.
RESTRUCTURING AND PRIVATISATION
Restructuring and privatisation are now widely considered as vital means of government policy to create
suitable conditions for enhanced economic growth and for redefining the role of the state. There are a large
variety of restructuring and privatisation models of state utilities, ranging from minimum to full withdrawal
of the state. Moreover, restructuring most likely leads to privatisation, its goal being to make companies
more attractive to potential buyers and operators.

Theoretically, many scholars have tried to answer the questions of when to privatise, whether to privatise
rapidly or slowly, what order should be followed in privatising companies (sequencing), whether a SOE
should be sold at once or in stages (staging), and whether a SOE should be restructured prior to sale (or just
restructure SOE) (Megginson and Netter, 2001). In this respect, many authors have modelled the matter of
both the sequencing and staging of SOE sales (such as Boycko et al. (1996)).

The models explain the importance of sequencing and staging by the privatising government to build
reputational capital with investors and create local support for the privatisation programme. On the other
hand, these complex relationships have decreased researchers‟ ability to identify factors in sequencing and
staging. It is now generally agreed that privatisation and restructuring do not produce the same outcomes in
all places, and their design and implementation need full preparation as well as considerable consultation.

These processes do not necessarily lead to more efficiency, greater competition or a more profitable
operation, and should be developed in a larger context of market reform, bearing in mind standards of good
management and competition regardless of the structure of ownership,
AGENT-PRINCIPAL THEORY, OWNERSHIP AND COMPETITION

Agency situations occur when one party (principals, such as shareholders) delegate to another party (i.e.
agents, such as managers) decisions over the use of their property or property rights (Arrow, 1985;
Martinand Parker, 1997). This arrangement may be economically efficient from the point view of
specialisation or comparative advantage, but agency relationships also include the idea of divergent
objectives. The scheduleof the agents may not be the same as those of the principals, particularly because
agents can be expected to be self-interested. In particular principals are at risk from the dysfunctional
behaviour of agents, which thendecreases the value of the property rights (Martin and Parker, 1997;
Abdeldayem, 2015).

D is superior to A, where “D” represents private ownership and a competitive market and “A” has public
ownership and a monopolistic market. 2- D is superior to C, since “C” represents a private monopolistic
market. This reflects the standard economic view, which prefers a competitive market. 3- D is equal to or
superior to B
This implies that in a competitive environment private companies are better than public companies. 4- B is
superior to A, indicating in a non-competitive environment the policy role of a private capital market. 5- B is
superior, inferior or equal to C, depending on the ownership role as well as the monopolistic position. The
expectation is that maximum efficiency gains can be achieved if privatisation is combined with a kind of
competition in the product market, this might occur in the case of moving from point “A” to “D.”
Smaller gains might be expected when the movement is from point “A” to “C”(i.e. privatising a of competition
in the product market, this might occur in the case of moving from monopolist)or from “B” to “D” (i.e.
privatising a company in a competitive market). Gains might also be expected when the movement is from
“A” to “B” (i.e. exposing a publicly owned monopoly to competition) or from “C” to “D” (i.e. exposing a
privately owned monopoly to competition).
 As far as agency theory is concerned, a standard property rights approach to public and private ownership
documents that there are agency problems in all forms of ownership, but since ownership is transferable
through competitive capital markets in the private sector, a better use of resources can be achieved. On the
other hand, public choice theory is concerned more directly with actual behaviour in the public sector. At the
core of this literature is a big debate over how much politicians and state bureaucrats follow their own
agendas rather than the public interest (Aranson, 1990; Martin and Parker, 1997; Abdeldayem, 2015).
METHODS OF PRIVATISATION
The decision of selecting the method of privatisation to be adopted is a difficult one since this decision
includes some economic factors such as valuing the assets as well as some political aspects. However,
Megginson and Netter (2001) highlight that several factors that affect the privatisation method should be
taken into consideration.

Of these factors there are: 1- The history of the asset‟s ownership 2- The financial and competitive position
of the SOE 3- The government‟s ideological view of markets and regulation 4- The past, present, and
potential future regulatory structure in the country 5- The need to pay off important interest groups in the
privatisation 6- The capital market conditions and existing institutional framework for corporate governance
in the country 7- The government‟s willingness to let foreigners own divested assets Therefore, the
complexity of the objectives of the privatisation process means that different countries have used many
different methods or techniques in divesting many different assets.

According to Brada (1996) and Megginson and Netter (2001) there are four different categories in
privatisation. Moreover, many privatisations use combinations of these different types of privatisation. These
categories involve: 1- Privatisation through restitution: This method of privatisation is suitable when easily
identifiable assets such as land which was expropriated previously can be returned either to its original
owners or heirs. This method of privatisation is generally encountered mainly in Eastern European countries.
The main difficulty with this method of privatisation is that it needs records to prove the ownership and
these records could be unavailable or conflicting and inadequate.

2- Privatisation through sale of state property: According to this method governments trade their
ownership claim for an explicit cash payment. This category includes two different methods i.e.: 2/a-
Direct sales (or asset sales) of SOEs (or some parts of them) to an individual, corporation or a group of
investors. 2/b- Share issue privatisations (SIPs), under which some or all of a government’s stake in a SOE
is sold to investors viaa public offering of shares. These are similar to the initial public offerings (IPOs) in
the private sector, but while private IPOs aim basically at increasing revenue, SIPs aim at raising money
and responding to some political factor.
3- Mass or voucher privatisation: Under which eligible citizens can use vouchers (that are distributed free or
at nominal cost) to bid for stakes in SOEs or other assets that have been divested. This method has been
adopted only in the transition economies in Central and Eastern Europe. 4-Privatisation from below: This
method of privatisation became more popular in the former socialist countries as well as several
transitionaleconomies. Rapid entry and formation of new business has been a feature of nearly all
transitional economies. Growth of the new private sector is widely recognised as one of the success stories
of the economic transition from socialism. The key feature of this method is entry, which creates
competition and drives market development, leading to a decline in state control and monopoly. In
addition to the four categories mentioned above, there are other methods that governments can employ to
increase private sectorparticipation. For instance, Vuylsteke et al. (1988) highlight seven methods of
privatisation, which are: 1- Public offering of shares (full or partial) 2- Private sale of shares 3- New
private investment in an state owned enterprise (SOE) 4- Sale of government or SOE assets 5-
Reorganisation (or break-up) into component parts 6- Management/ employee buyout 7- Lease and
management contract In the case of full privatisation, the government may sell the whole enterprise
(i.e.100% of the enterprise shares) to the private sector.
The sale of public enterprises, wholly or in part, does not have to occur in the market place. For instance the
government might sell an enterprise to the employees of the enterprise. Another alternative is to sell a certain
percentage of shares to the general public and retain the rest for the employees.
PRIVATISATION EFFICIENCY AND EFFECTIVENESS

Vickers and Yarrow (1993) argue that privatisation of a company, which enjoys substantial market power
will tend to improve internal efficiency. However, this could be at „the risk of allocative efficiency‟ unless a
suitable framework of regulation and competition controls profit-seeking behaviour. In this regard, Hodges
(1997) argues that privatisation does not necessarily improve efficiency, effectiveness or service. A main
advantage of the privatisation process is the removal of industries and companies from government
intervention and the public financing cycle.

The process has revealed that companies can be transferred while still publicly owned. Utilising a four-
quadrant figure (Figure 1) (Hodges, 1997) reported that privatisation rhetoric has implied that companies
will move from quadrant B to quadrant D, but in some cases the movement is from B to D via A. It is
possible also that the move will appear as one from quadrant B to C, as there is no obvious relationship
between economic/financial performance and managerial performance.
It is highly likely that escape from short-term political intervention will improve a manager‟s long term
investment decisions and technical validity. However, in the case of actual or quasi-monopolies, where
competition is limited, there is no certainty of improvement in effectiveness, efficiency and quality

THE ROLE OF INTERNATIONAL AGENCIES IN THE PRIVATISATION PROCESS

International agencies such as the World Bank were affected by the policies of both the USA and the UK in
the early 1980s. The World Bank adopted the policy of tackling poverty in the world, hence, the bank
decided that markets should be as free as possible. Since then, much of the world’s bank lending has been in
the form of sector adjustment loans to European, Asian, Latin American, Middle Eastern and African
countries. Between 1981 and 1992 the World Bank supported more than 70 countries with 182 operations,
the majority of them in Sub-Saharan Africa, Latin America and Eastern Europe.

After that, privatisation became a vital component of the Structural Adjustment programme (SAP) of the
World Bank. The World Bank provides structural adjustment loans (SALs), sectoral adjustment loans
(SECALs), technical assistance loans (TALs) and public enterprise reform loans (PERLs). During the last
decade the bank has given these loans to many developing counties in the world in order to develop and
accelerate their structural adjustment programmes as well as privatisation.

In addition to the World Bank, there are some other major international donor agencies such as the
International Monetary Fund (IMF), the US Agency for International Development (USAID), the
International Finance Corporation (IFC) and the Asian Development Bank (ADB). All these agencies are
involved in encouraging privatisation programmes, and finance, consultancy and advisory services to
enhance reform programmes throughout the world (Ramamurti, 1997). To conclude, both the major
international agencies i.e. the World Bank and the IMF have turned towards the development of privatisation
and this could be as a result of the impact of neo-liberal governments in industrialised countries.
PREVIOUS EMPIRICAL RESEARCH

Since privatisation became an essential part of government policy almost two decades ago, enough time has
passed to allow researchers to undertake studies that examine the effect of privatisation on the financial and
operating performance of former SOEs. Table 2 below lists 42 selected studies, which represent a summary
of previous research work. These studies are discussed in more detail following the table. To begin with,
Boardman and Vining (1989) examined the financial execution of 500 of the biggest non-US organizations
in 1983, characterized by the structure of possession as, state claimed, exclusive and blended proprietorship
ventures (ME). They resort to four gainfulness proportions and two proportions of effectiveness. The
creators report that state possessed and blended proprietorship organizations are fundamentally less gainful
and profitable than exclusive firms. They additionally locate that blended possession organizations are not
any more productive than state claimed firms. In this manner, unadulterated private possession is required to
pick up productivity. Vining and Boardman (1992) examine whether possession "matters" in deciding the
productivity of state claimed endeavors (SOEs), or if just the level of rivalry is essential. The gauge
execution display utilizes information from 500 of the biggest non-money related Canadian firms in 1986
(these organizations incorporate 12 SOEs and 93 blended possession undertakings).

The creators, subsequent to taking into consideration a few factors, for example, a company's size and piece
of the overall industry, locate that privately owned businesses are more beneficial and productive than MEs
and SOEs, and that MEs out-perform SOEs. In this way, proprietorship has an effect extraordinary and
separate from rivalry

Examine whether privatisation is needed to improve the performance of SOEs by testing the response of the
Polish State sector during the three years after the “Big Bang” reforms of January 1990. These reforms
tightened monetary and fiscal policy, and liberalised prices but did not involve privatisation. The authors
find that even without privatisation, performance improved significantly because of a macroeconomic
stabilisation package. Essentially, these improvements came about through the imposition of hard budget
constraints and tight lending policies that were adopted by banks. The World Bank commissioned a major
study undertaken by Galal et al. (1994) which compares the actual post privatisation performance of 12
companies from four countries: Chile, Malaysia, Mexico and the United Kingdom.

The author’s document net welfare gains in 11 of the 12 cases, in addition, they did not find any cases in
which workers showed an overall loss from privatisation. However, they reported 3 cases in which workers
were become significantly better off. Megginson et al. (1994) compare the pre- and post-privatisation
performance (both financial and operating performance) of 61 firms from 18 (12 industrialised and 6
developing) countries and 32 industries that adopted privatisation through public share offerings during the
period 1961 to 1990.

The authors document significant performance improvement in terms of an increase in sales, profitability,
capital investment spending and operating efficiency without sacrificing employment security. Moreover,
these firms dramatically decreased their debt levels and increased dividend payout. Martin and Parker (1995)
using two measures (ROR on capital employed and annual growth in value added per employee-hour) to
examine whether 11 British companies privatised between 1981 and 1988 had improved profitability and
efficiency after being privatised. The authors document that less than half the companies perform better after
being privatised and that several improved before privatisation. Ramamurti (1996) surveys four telecom, two
airlines, and one-toll road privatisation programmes in Latin America between 1987 and 1991. Further, the
author discusses expected economic issues, ideological opposition to privatisation and methods used to
overcome bureaucracy.
The author reports that privatisation is very positive fortelecoms, because of the scope of technology,
attractiveness of offer conditions and capital investment, while productivity improvements for airlines and
roads were much more moderate. Petrazzini and Clark (1996) document the fact that both deregulation and
privatisation are associated with dramatic improvements in level and growth of teledensity, however neither
have any consistent effect on service quality. Furthermore, while deregulation is associated with increases in
employment and a decline in prices, privatisation has the opposite impact. Pohl et al. (1997) compare the
extent of restructuring achieved by more than 6300 private and state owned companies in 7 Eastern
European countries from 1992 and 1995. They use 6 measures to determine which restructuring strategy
improved performance the most. The authors document that privatisation significantly raises the probability
of restructuring and the likelihood that it will be successful. Boubakri and Cosset (1998) compare the pre-
and post-financial and operating performance of 79 firms from 21 developing countries that experienced full
or partial privatisation during the period 1980 to 1992. The authors document significant increases in
profitability, operating efficiency, capital investment spending, output, employment level and dividends.

Furthermore, the authors document a significant decline in leverage after privatisation. Frydman et al. (1999)
compare the performance of privatised and state owned companies in the transition economies of Central
Europe and ask the question “When does privatisation work?” They test the effect of ownership composition
on the performance of 90 SOEs and 128 privatised firms in the Czech Republic, Hungary and Poland. The
authors highlight that privatisation “works” but only when the company is controlled by outside owners.
D‟Souza and Megginson (1999) compare the pre and post privatisation financial and operating performance
of 85 firms from 28 industrialised countries that are privatised through public share offerings from 1990 to
1996.

The authors document dramatic increases in profitability, operating efficiency, output, dividend payments
and capital expenditure. Moreover, employment decreases, but not significantly. Boubakri and Cosset (1999)
examine the pre and post privatisation performance of 16 African companies that are privatised through
public share offerings between 1989 and 1996. They also summarise 3 other studies in developing countries
related to privatisation. The authors document significant increases in capital spending by privatised
companies but insignificant changes in profitability, output, efficiency and leverage. Tian (2000) studies the
relationship between state shareholding and the corporate performance of 825 Chinese firms in 1998. 413
firms had some government ownership, 312 firms had none. The author documents the fact that “private”
firms‟ performance is significantly better than that of “mixed” firms.

In addition, the author finds in general that corporate value decreases with state ownership, but rises after the
state share drops below 45 %. Boylaud and Nicoletti (2000) employ databases of market structure and
regulation to examine the impacts of liberalisation and privatisation on productivity, quality and prices of
telecom services in 23 countries during the period 1991 to 1997.The authors document the fact that in
telecom services, both potential and actual competition caused improvements in productivity and quality, but
they could not find any clear impact of privatisation. Lizal et al. (2000) using data for 373 companies in
1991 and 262 companies in 1992, test the performance impacts of the wave of break-ups of Czechoslovak
state owned enterprises on the subsequent performance of the master companies and their spin off.
The authors document the fact that in 1991, there was an immediate positive impact on the profitability and
efficiency of small and medium size companies and a negative impact for the larger companies. In 1992, the
results were similar but not statistically significant. Black et al. (2000) survey the history of privatisation
programmes in Russia. While mostly descriptive, a large number of case studies are analysed. The authors
document the fact that Russian privatisation programmes in particular have failed and have created a
“kleptocracy”. Furthermore, they concentrate on the importance of encouraging managers to delegate in the
process of designing privatisation programmes
Examine offering terms and share ownership results for 65 banks which privatised either fully or partly
during the period 1981 to 1996. They also compare the pre and post privatisation performance of 32 banks in
OECD countries and 5 banks in developing countries. The authors find moderate improvement in OECD
countries. Profitability, fee income, and capital adequacy ratios all increased significantly but the leverage
ratio decreased significantly. They also, document large ongoing state ownership and dramatic early returns
to initial public offering investors. Wright (2002) examines the impact of divestment on company
performance, utilising an unbalanced panel of 132 UK quoted companies during the period 1985 to 1993.
The results suggest that divestment has a positive, significant and substantial impact in increasing the
profitability of the vendor company. In addition, the author finds limited support for the view that the benefit
from divestment is greater for larger and/or more diversified companies and companies operating with weak
governance arrangements. In light of the empirical studies mentioned above, the researcher can classify the
42 empirical studies into four distinct categories.

These are:
1- Empirical Studies comparing the performance of government owned companies.
2- Empirical Studies in single country or single industry (Non-Transition Economy).
3- Empirical studies in Transition Economies (either Central and Eastern Europe or Russia and the
former Soviet Republics).
4- Empirical Studies comparing pre and post privatisation performance changes
Empirical Studies comparing the performance of government owned companies
These studies include: Boardman and Vining (1989); Vining and Boardman (1992); Pinto et al. (1993);
Ehrlich et al. (1994); Majumdar (1996); Kole and Mulherin (1997); Dewenter and Malatesta (2000); Tian
(2000) and Karpoff (2001). Megginson and Netter (2001) present some prospective problems in researching
this area such as: lack of data and bad data, endogenity, omitted variables and selection bias. Furthermore,
they report two methodological difficulties, particularly in attempting to isolate the impact of ownership on
performance:
a- In comparing SOEs to privately owned firms, it is very difficult to determine a suitable set of
comparison companies or benchmarks with a limited private sector particularly in developing
countries.
b- In general, there are essential reasons why the government owns specific companies while others are
privately owned, involving the degree of perceived market failure within the particular industry
Empirical studies in developing countries

These studies in Central and Eastern Europe include: Claessens et al. (1997); Pohl et al. (1997); Weiss
and Nikitin (1998); Frydman et al. (1999); Claessens and Djankov (1999); Frydman et al. (2000); Harper
(2000)and Lizal et al. (2000) while the studies in Russia and the former Soviet Republics include both
(Barberis et al., 1996) and Black et al. (2000). In addition to the studies cited above in this category there
are several other empirical studies of privatisation in transition economies especially in Russia and the
former Soviet Republics. As examples: Earle (1998); Earle and Estrin (1998) and Djankov (1999). As can
be noticed, examining the impact of privatisation on company performance is more difficult in transition
economics than in non-transition economies.
This is mainly due to privatisation in these countries occurring only aspart of large economic reforms or
wide changes. Consequently, isolating the impacts of privatisation can prove to be difficult. Further, the data
from transition economies is much worse and much more difficult to obtain than from non-transitional
economies. Furthermore, these studies employ different methods of privatisation in divesting SOEs,
including asset sales, voucher privatisation, spontaneous privatisation, share offering or a combination of
these methods. Also, these studies resort to different methodologies and cover differing time periods during
the 1990s. Moreover, all these empirical studies examine either directly or indirectly the effect of
privatisation on the company’s operating performance.

Empirical Studies comparing pre and post privatisation performance changes

The most relevant studies pertaining to this research effort include: Megginson et al. (1994); Boubakri and
Cosset (1998); D‟Souza and Megginson (1999); Boubakri and Cosset (1999); Verbrugge et al. (2000);
D‟Souza and Megginson (2000); Dewenter and Malatesta (2000); Harper (2001) and Bortolotti et al. (2002).
The above studies adopt the same methodology to test the similar variables that were employed by
Megginson et al. (1994). By using this methodology these studies can test and compare the pre and post
privatisation performance of large numbers of companies, from different industries, divested in different
countries and over different time periods.
CONCLUSIONS AND FUTURE RESEARCH
The review of the literature reveals that. privatisation had taken its first and biggest hold in the UK. It has
however spread very rapidly throughout the world, affecting poor countries as well as rich ones, backward
economies and advanced ones. It has been applied by both communist and capitalist governments and by
democracies and dictatorships. Its universal applicability can be judged by its ubiquity. It affects countries in
the East and the West, in the Northern and Southern Hemispheres, and has touched every continent.
Privatisation objectives are broadly similar across countries in that they concentrate on achieving benefits
from re-balancing the roles of the private and public sector to enhance the productive power of the economy.
 3.1 GAP OF STUDY
It is well recognized that the impact of privatization policies hinges on the market structure to which they apply.
We show that different degree of efficiency gain sharply changes the comparisons of optimal subsidy, total outputs
and social welfare between mixed and private duopoly. What is more, for an imposition of an optimal subsidy,
welfare may increase, decrease, or remain unchanged with privatization, which depends on the level of the cost
efficiency gap and the taxation burden. However, it may be possible to raise welfare through privatization as long
as the efficiency gain prevails or no excess taxation burden exists. Government sets higher subsidy to stimulate
firms' production if the value of cost-differential is assured.

The Hitotsubashi Journal of Economics was first published by Hitotsubashi University in October 1960. Now, it is
published bi-annually and is open to all researchers in the field of economics. In particular, The Hitotsubashi
Journal of Economics has acquired a reputation for excellence in economic studies that concern empirical,
theoretical, and/or historical aspects of the Japanese and Asian economies. Currently, its editorial board is jointly
operated by the Graduate School of Economics and the Institute of Economic Research and offers a reasonably
quick and fair assessment of manuscripts in most economic field of privatization.

Hitotsubashi University is a national university corporation, specializing comprehensively in the social sciences
and humanities. Since its foundation, Hitotsubashi has been at the forefront of Japan’s innovation. It has been a
powerhouse for generations of Japan’s globally active business leaders as well as a research hub producing
cutting-edge research in the global academic network of the social sciences. Established: 1875, Faculty: About 670
faculty members, Students: About 6,400 Hitotsubashi University is made up of 12 principal academic units – four
faculties, seven graduate schools and one institut
 CHAPTER NO 4 – COMPANY PROFILE
4.1 INTRODUCTION
The Shipping Corporation of India was established on October 2nd, 1961, by the amalgamation of Eastern
Shipping Corporation and Western Shipping Corporation. Starting out as a marginal Liner shipping
Company with just 19 vessels, the SCI has today evolved into the largest Indian shipping Company.
Starting out as a marginal Liner shipping Company with just 19 vessels, the SCI has today evolved into the
largest Indian shipping Company. The SCI also has substantial interests in various segments of the shipping
trade. SCI’s owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, and
Passenger-cum-Cargo vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore
Supply Vessels. Sailing through for six decades, SCI today has a significant presence on the global maritime
map.

As the country’s premier shipping line, the SCI owns and operates around one-third of the Indian tonnage,
and has operating interests in practically all areas of the shipping business; servicing both national and
international trades.

In view of the demand from Indian trade, the SCI has diversified into a large number of areas. The SCI is
today the only Indian shipping Company operating: break-bulk services, international container services,
liquid/dry bulk services, offshore services, passenger services. In addition, the SCI mans and manages a
large number of vessels on behalf of various government departments and organizations.

The SCI has immensely contributed to the growth of India’s EXIM trade and the national exchequer, by
being a net earner/saver of valuable foreign exchange.

Over the years, SCI has been a lifeline for the country in times of emergency and distress, by ensuring
continued and uninterrupted supply of crude oil, which drives the country’s economy.

Liberalization and globalization of the Indian economy has presented the SCI with a suite of growth and
diversification opportunities. The SCI’s growth has been additionally spurred on by the presence of a
modern, young and diversified fleet, operated by a large pool of well trained and experienced manpower,
both onshore and at sail.

As a profitable commercial venture of the Government of India, the SCI has an excellent track record of
profitability since its inception. The SCI’s annual performance has consecutively been rated excellent for a
record 18 times, under the Memorandum of Understanding (MoU) signed with the Government of India.

The Government of India has conferred “Navratna” status to SCI on 01.08.2008 - enhanced autonomy and
delegation of powers to the Company towards capital expenditure, formation of Joint Ventures, mergers, etc.
Continued profitability of the SCI is been due to a slew of innovative and timely strategies and measures
adopted by the SCI management. Amongst these include, inter alia, judicious and optimal utilization of
available tonnage, by deploying it in the most remunerative sectors; commencement of new services in niche
markets; identification and expeditious disposal of value destroyers or non-performing assets; forging
alliances with leading market players to enhance cargo; availability and apportioning of expenses; and
administrative cost cutting.

The SCI takes pride in being a responsible and socially committed owner, placing greater emphasis on the
safety of life, vessels, cargo and the environment it operates in. Today, the SCI has evolved into a highly
quality and safety conscious organization.

Not surprisingly, the SCI has received numerous awards and accolades from various national and
international organizations for excellence in customer satisfaction, operational efficiencies, human resource
training and emergency preparedness.

In tune with the global trend for specialization and the premium placed on core competencies, the SCI has
charted a definitive course of action for the future. Thrust areas for growth and diversification focus on
energy transportation, including a sunrise segment like transportation of LNG and containers. The SCI
forays into new thrust areas could either take the form of direct capital investment or by forging strategic and
symbiotic alliances with significant market players in the market.

The SCI has heralded India’s entry into the specialized field of LNG transportation, by acquiring a stake in
the two Indian LNG transportation agreements contracted till date, after a global bidding process. SCI is the
only Indian shipping company engaged in transportation of LNG, a vital fuel for India’s power plant and
chemical / petrochemical industry. For the same purpose, SCI has formed three Joint Ventures with one
vessel each. On two of these LNG vessels, SCI is managing onboard operation and technical management
and the remaining vessesl is fully manned by SCI.

The SCI possesses all the ingredients essential for emerging as a truly world class international shipping
Company. The endeavour of the management is to facilitate the release of boundless energy and initiative
streams, which will be channelled for the growth and prosperity of the Company and the nation.

4.2 HISTORY OF COMPANY

SCI was established on 2 October 1961 by the amalgamation of Eastern Shipping Corporation and Western
Shipping Corporation. Two more shipping companies, Jayanti Shipping Company and Mogul Lines Limited,
were merged with SCI in 1973 and 1986 respectively.
SCI started out with 19 vessels. It gradually metamorphosed into a conglomerate having 80 ships of
59 lakh (5.9 million) tonnes deadweight (DWT) with interests in different segments of the shipping trade.
On 21 November 2019, the Government of India approved the privatisation of SCI.
SHIPPING CO-OPERATION OF INDIA HAS BEEN TAKEN OVER BY PRIVATIZATION
 CHAPTER 5 -DATA ANALYSIS AND INTERPRETATION

5.1 INTRODUCTION

Data Analysis is the next step after Review of literature, whatever data which we have collected through the
questionnaire need to be put systematically so that it becomes easy for the reader to know what the results
are. In simple words, data analysis is the process of collecting and organizing data in order to draw helpful
conclusions from it. Data Analysis is the process of systematically applying statistical and or logical
techniques to describe and illustrate, and evaluate data.
Data analysis, on the other hand, focuses on the process of turning raw data into useful statistics,
information, and explanations. The process of data analysis uses analytical and logical reasoning to gain
information from the data. The main purpose of data analysis is to find meaning in data so that the derived
knowledge can be used to make informed decisions.
According to LeCompte and Schensul, “research data analysis is a process used by researchers for reducing
data to a story and interpreting it to derive insights. The data analysis process helps in reducing a large chunk
of data into smaller fragments, which makes sense”
Marshall and Rossman, on the other hand, describe “data analysis as a messy, ambiguous, and time-
consuming, but a creative and fascinating process through which a mass of collected data is being brought to
order, structure and meaning”.
Our data is the backbone of our research. It is the base on which the entire study will rely upon.
After getting through various struggles a researcher gets a mass amount of data & thus it becomes very
important to properly integrate this data and organize it in a very systematic manner. The very basic
importance
That why the data should be analysed logically and systematically is that it should be easily understandable
by the potential readers.
It’s not the case that our reader will be only scholars or experts, it can be any one even an undergraduate
student or someone who is very new to this research world, so it is needed to put it in a very basic manner.
One can only break down a macro problem into micro ones & this can only be done through analysis of data.
It is an exceedingly important step in order to make the research reach out to a wider audience.
5.2 DATA ANALYSIS

As analysed by creating and distributing a Google form among peers, responses were collected to gather pre-
requisites in order to statistically sort and implement calculate data in the field of privatization.

A. Age Group

B.

Analysis: From the 52 respondents survey in the Gender of Male are of 38.5% respondents & female
are of 61.5% respondents.
 C.

OPTIONS NO OF RESPONDENTS
Yes 84.6%
No 7.7%
Maybe 7.7%
Total 100%

Analysis- As the above table shown 84.6% respondent know about privatization. 7.7% respondent are not
aware of privatization.
D.

OPTIONS NO OF RESPONDENTS
Yes 50%
No 15.4%
Maybe 34.6%
Total 100%

Analysis- As shown in the above table 50% of people responded that privatization will improve
economic growth and development rapidly and 15. 4% people didn’t agree to this point.
 E.

OPTIONS NO OF RESPONDENTS
Yes 53.8%
No 7.7%
Maybe 38.5%
Total 100%

Analysis – As shown in above table 53.8% of people agreed on the point that privatization increase the
market profitability in world and 7.7% people didn’t agreed on this point.
 F.

OPTIONS NO OF RESPONDENTS
Leasing 21.2%
Franchising 51.9%
Contracting 26.9%
Total 100%

As shown in the above table for privatization to be achieved 21.2% people chose leasing, 51.9% people
chose franchising and 26.9% chose contracting.
 G.

OPTIONS NO OF RESPONDENTS
Yes 53.8%
No 9.6%
Maybe 36.5%
Total 100%

As shown in the above table 53.8% people agreed that privatization is good for economy and 9.6% people
didn’t agreed to this point.
 H.

OPTIONS NO OF RESPONDENTS
Yes 21.2%
No 42.3%
Maybe 36.5%
Total 100%

As shown in the above table 21.2% people agreed that privatization lead to unemployment and 42.3% people
didn’t agreed to this point.
 I.

OPTIONS NO OF RESPONDENTS
Fiscal burden 48.1%
Financial crisis 36.5%
Heavy loses 15.4%
Total 100%

As shown in the above table 48.1% people agreed that fiscal burden is the reason for privatization, 36.5%
agreed on financial crisis and 15.4% agreed on heavy loses.
 CHAPTER 6- CONCLUSION & SUGGESTIONS
CONCLUSION:
Privatisation should not be pursued as an ideology, as in modern economic theory and policy there is no
room for dogmatism. After the Great Recession of 2008, the neo-liberal school of economics has been
discredited and there is universal recognition for regulation of financial services.

The shining stars of economic performance - China in Asia, Germany in Europe, and Brazil in Latin
America - have achieved their stellar growth without adopting privatisation as a major plank of public
policy. There should be no privatisation for the sake of privatisation as has occurred in Pakistan. The role of
public and private sectors should be delineated on a pragmatic basis without ideological fervour.
Transparency in the process of privatisation is the indispensable condition for its success.
The ingredients of transparency are:

1. Proper advertisement

2. Proper determination of reserve price

3. Proper pre-qualification of bidders

4. Payment in short period of one to three years

Article 23 of Privatisation Ordinance of 2000 states, "advertisement for privatisation where necessary will
also be placed in newspapers with international circulation". Advertisements were placed in national
newspapers but never), in newspapers of international circulations. In case of major privatisations like Habib
Bank the foreign newspapers chosen were Arab News and Khaleej Times, whereas the relevant newspapers
of international circulations are the Financial Times and the Wall Street Journal.

Financial consultants were appointed for determination of reserve price. It would take another study with full
access to the records of the Privatisation Commission to determine if the reserve price was properly
calculated in about hundred privatizations since 1990. The determination of reserve price should be done in a
more elaborate manner as discounted cash flow is not always the best method. The resort to determining the
assets value or the value based on the market price of shares should be preferred. In any case, a single
method should not be adopted for value determination. Moreover, instead of appointing one evaluator for the
sale of mega enterprises like Habib Bank and PTCL worth billions of rupees, it is necessary to appoint two
to three evaluators and then hold a joint meeting with them to determine the correct value of the units to be
privatised. Secrecy of reserve price was not maintained and in most cases bidders knew the reserve price.
This was also observed in the study by the Asian Development Bank.

Pre-qualification of bidders requires consultation with its bankers, statement of taxes, market reputation and
experience of running similar units. This was not rigorously done in many cases. The extreme example is of
Schon group which was given two units all of which dosed after privatisation. Twelve other units closed
after privatisation clearly indicating that buyers were assets strippers and had no intention of running them.

In many cases of privatisation especially those in 1990s, the bidders did not pay the amount in stipulated
time period and recoveries despite bank guarantees were made after almost two decades. In short,
privatisation in Pakistan suffers from lack of transparency. It would be idealistic to expect transparency in
privatisation when Pakistan's score in this field is only 0.3 out 1.0 according to the Transparency
International.
The second essential condition of successful privatisation is proper sequencing. The word sequencing does
not appear in any publication of the Privatisation Commission and it was never a consideration in the
privatisation process in Pakistan. It is difficult to find good buyers if a large number of units, eg, 47 in 1992,
were sold in a short period of one year. There should be alternation between big and small units, and the
privatisation process should be spread over a long period of time to elicit a good response from private
parties. The experience of international privatisation shows that rushed and bunched privatizations are
hazardous.

The third condition for successful privatisation is sector selectivity. It is not the business of government to
run small units like roti plants, flour mills, ginning factories, or rice huskers. Similarly, consumer goods
products like vegetable ghee, soap, and other such goods should be left to the private sector. There can be a
debate on keeping some factories in sugar, cement, and fertiliser in the public sector in order to prevent their
cartelization, but on balance they should be in the private sector.

Pakistan is an energy deficient economy. We are producing only 20% of our oil requirements and facing
acute short falls in electricity and gas. Although we have one of the largest reserve of coal of the world but
we are net importers of coal. Sale of profitable energy units like Kot Addu Power Plant, oil and gas wells,
National Refinery, LPG business of SNGL and SSGL etc, were not in national interest. Firstly there were a
sizeable and stable source of government revenues and provided for government participation in the relevant
boards to protect national interests. Secondly these were all bought by foreign companies as domestic
entrepreneurs could not run them. Foreign investment in the energy sector should be encouraged to find
more oil and gas rather than buying proven and highly profitable energy units. In the USA which is the
citadel of capitalism, Unocal an oil company which produces only 1% of USA domestic output (which is
half of its requirements) was being bought by a Chinese company. It raised such a hue and cry in the media
and the Congress that the Chinese company was force to withdraw its offer. In almost all developing
countries even as small as Kuwait and Qatar foreign participation is not allowed in their energy business.

Privatisation of Pakistan State Oil was being considered but it was shot down by the defence establishment
as it is essential to have a national oil distribution company after the bitter experience of 1965 when all the
distribution companies were foreign and they did not fully cooperate in the war effort. Therefore, the energy
units should be treated as strategic assets whose sale to foreigners is not in national interests.

Public utilities/natural monopolies should also be excluded form the privatisation process. Firstly, in a
monopolistic situation, the producer can raise prices without relation to cost and exploit the consumers.
Secondly, public utility like PTCL should cover all areas and extend facilities to remote corners which are
not profitable. There can be cross subsidisation in case of public management but a private party has no
incentive to extend facilities to non profitable areas. Thirdly with foreign management PTCL could provide
access to foreign intelligence on secret telephonic exchanges between Pakistan and foreign countries.
Therefore some of the public utilities are strategic and should remain under national management.

The fourth condition for effective privatisation puts emphasis on the need to create favourable conditions for
privatization to succeed. The government must create better regulatory and institutional framework. In
Pakistan, we have created Ogra for regulating gas and oil prices, Nepra for regulating electricity prices, and
Competition Commission of Pakistan for conducting inquires and imposing punishments in case of
cartelization and absence of competition. The regulatory framework must be put in place before starting with
privatisation in vital economic sectors.

Privatisation follows the political framework and economic philosophy of its period. With the collapse of
Communism in the USSR and the fall of the Berlin Wall in 1989, privatisation became an international
norm. The neo-liberal school in economics and the Washington Consensus trilogy of liberalization,
deregulation and privatization became the hallmarks of economic policy around the globe. The recent
international breakdown shows that Western Europe accounted for almost half the revenues in the quarter
SUGGESTION:

The government is nowadays aiming at privatisation because the entities owned by it are no longer earning
profit. They demand funds to run their affairs, burdening the state exchequer further. Fragile management,
corruption, nepotism and favoritism are some of the significant reasons behind their loss.
The government decided to privatize 32 out of 62 state-owned businesses in the first round. Although
privatisation is generally a successful phenomenon throughout the world, it has a very black history in
Pakistan. In the 1990s the ruling party had done privatisation. But it was very faulty.

The Muslim Commercial Bank was sold to a textile tycoon despite low bid in contrast to other willing
buyers. The same happened during the privatisation of the KESC and the PTCL during Musharraf era where
ministers were accused of receiving kickbacks from companies.

The government is again opting for privatisation of the property of the people. It needs to ensure a fair and
legitimate process and avoid previous mistakes.

Private owners go for downsizing soon after taking control of the entities. The government must create some
employment opportunities for people or to include some clause of non-firing the staff. It will otherwise
increase unemployment.

The government should also add some clauses so that buyers do not blackmail the government after
privatisation.
 REFERENCE
Abdeldayem, M.M., 2015. Examining the relationship between agency costs and stock mispricing: Evidence
from the Bahrain stock exchange. International Journal of Economics, Commerce and Management, 3(4): 1-
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overconfidence, optimism and risk aversion matter? Asian Economic and Financial Review, 8(7): 925-
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Bortolotti, B., J. D‟Souza, M. Fantini and W.L. Megginson, 2002. Privatization and the sources of
performance improvement in the global telecommunications industry.

.
 APPENDIX (QUETIONNAIRE)

Q1 Gender
Q2 Are you aware of privatization?
Q3 Does privatization will improve economic growth and development rapidly?
Q4 Does privatization increase the market profitability in world?
Q5 Does privatization will help to public enterprises in India?
Q6 Privatization can be achieved by:
Q7 Is privatization good for the economy?
Q8 Does Privatization lead to unemployment?
Q9 what are the main reasons for privatization?
 BIBLIOGRAPHY

https://en.m.wikipedia.org/wiki/Shipping_Corporation_of_India

https://www.scribd.com/document/170907439/Literature-Review

https://www.researchgate.net/publication/236183760_A_literature_review_The_role_of_the_private_sector_
in_the_production_of_nurses_in_India_Kenya_South_Africa_and_Thailand

https://libguides.usc.edu/writingguide/literaturereview#:~:text=A%20literature%20review%20surveys%20b
ooks,the%20research%20problem%20being%20investigated

https://www.dawn.com/news/1055777