Key Stages of Privatisation

1. Reviewing Options and Preliminary Planning

a) Objectives of privatisation

A government which is considering the privatisation of a particular enterprise may have a number of objectives in mind. Of these there are some which primarily concern the future of the enterprise itself, such as:

• Improving its performance, including the service it provides
• Making it (more) profitable
• Securing investment for it
• Removing it from the sphere of political influence or control (adversely this can be seen as removing the responsibility for it and blame for its problems from the Government and into other hands)

There are also more general objectives which the Government might be hoping to achieve with the privatisation. These include:

• Raising money from the sale of the enterprise
• Moving towards a market economy (some governments have been put under pressure to do this by the World Bank and the International Monetary Fund)
• Increasing share ownership amongst the general public
• Winning the approval of the public for this privatisation and the idea of privatisation,  thus paving the way for more privatisations in the future
• Selling it quickly to bring about the above effects as soon as possible

Another way of considering these is by dividing them up into short-term and long-term objectives.

Selling quickly, raising money and winning public approval are short-term objectives (though winning public approval also has long-term importance).

Improving the service, increasing the profit, moving towards a market economy and increasing share ownership are long-term objectives.

Securing investment for the enterprise and removing it from direct political control could be short-term or long-term objectives, depending on how far-sighted an approach the Government takes regarding such matters.

This is of course not an exhaustive list, and a government may well have other objectives in mind when it is considering the option of privatisation. It is almost certain that of the Government’s objectives some are more important than others and there is likely to be some conflict between the various objectives. For these reasons, the Government really needs to prioritize its objectives in order of importance when considering the range of options that are open to it.

Next: Evaluation of options

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