Privatization

Privatization:

Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector (the state or government) to the private sector (businesses that operate for a private profit) or to private non-profit organizations. It means government out-sourcing of services to private firms, e.g. functions like revenue collection, law enforcement, and prison management.

Types of Privatization:

There are four main methods of privatization:

Share issue privatization (SIP) - selling shares on the stock market

Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Freehand model

Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price.

Privatization from below- Start-up of new private businesses in formerly socialist countries.

Privatization Process:

The privatization process is aimed at selling government property in an open and transparent manner with a view to obtaining the best possible price. It varies somewhat depending on the nature of the asset being privatized, on the proportion of shares being offered for privatization, and on whether a transfer of management is involved. The Board of the PC decides what kind of process will be followed. Approval of Council of Common Interests is also obtained. Following are typical steps in the privatization process of a major unit:

1. Identification of an entity for privatization

2. Cabinet Committee of Privatization (CCOP) / Cabinet approval

3. Approval of Council of Common Interest (CCI)

4. Appointment of Financial Advisor (FA) for major transaction(s) with approval of PC Board

5. Appointment of Valuator where FA is not hired

6. Due diligence by FA / Valuator

7. Privatization strategy

8. Restructuring, sectoral / regulatory reforms if required

9. Expressions of Interest (EOI)

10. Screening -...