Privatising the Public Sector

Abstract

Privatisation can be defined as the change in ownership of state-owned firms through sale of equity to private individuals or entities and leading to complete private control and management. Means of privatisation are disinvestment through sale of private equity through the stock market; auction or negotiated sale of a controlling block or a majority shareholding to a chosen party; and sale through a voucher system that seeks to provide the ultimate owners (the people) or workers in enterprises an implicit stake in state-owned assets. Progress has been quick and substantial in Russia, slower but now significant in China, and halting and concentrated in profit-making enterprises in India. In all three cases privatisation seems to have been driven in practice by irrational short term considerations or purely ideological motivations. In any event, the acceptability of the process in an accounting sense and its integrity has been brought into question.