“Microeconomic

s”
INSTRUCTOR:
‘Sir Muhammad Mumtaz
Khan’

STUDENT
INTRODUCTION;
NAME : SYED OWAIS ALI
ID : SP07-BB-0135

Article;
 Privatization
And its Impact
Privatization
Introduction: The Concept of Privatization
The private sector is one of the principal mainstays of the
economic structure whereas privatization is viewed as a
basic tool for the productive system reform, which
constitutes, with other financial and monetary reforms, a
fundamental base for integrating the economic reform
program that can't be carried out effectively without any of
such reforms.
Privatization is an integrated system or a set of policies that
works together effectively to carry out the objectives of the
social and economic development via using market
mechanisms, making full use of the private sector
potentialities and creating spirit for competition which
leads to the benefit of the society individuals as it
minimizes costs, rationalizes the consumption of resources
and adopts the convenient channels.
To sum up, privatization is a process aiming at propping up
and activating the private sector's role in the economic field
at the national level. That is through transferring the
ownership of the public sector projects to the private sector
for enhancing the economic performance efficiency, as the
latter is more efficient in certain economic fields.

Therefore, privatization has three approaches as follows: -

First approach:
It means, " expanding the private ownership gradually to
increase the role of the private sector in the national
economy ". Such attitude can be realized through
liquidating – wholly or partly – the public sector by the
state, which should avoid the direct and sudden withdrawal
of that sector from the economic activity. In this way, the
state's role relatively and gradually contracts whereas the
private sector's role expands within the economic activity.

Second approach:
Privatization also means "to get rid of the public sector's
non performing units through transferring them to the
private sector with a view to achieve higher productivity
and profitability".

Third approach:
Privatization as well, is a desire to shift to the market
economy to cope with the new global system and achieve
economic emancipation depending mainly on the private
sector and urging it to lead the economic activity.
 Privatization Impacts
The Privatization Positive Impacts
The privatization positive impacts can be summarized as
follows:

(1) Enhancing the economic units efficiency.

(2) Increasing the growth of the private sector.
(3) Creating new job opportunities.
(4) Encouraging competition.
(5) Developing capital markets.
(6) Minimizing economic loss.
(7) Attracting foreign investments.
(8) Alleviating the burden on the state budget.
(9) Restoring the expatriates' savings to be invested in the
country.
(10) Providing the governmental resources required to
carry out infrastructure projects.

The Privatization Negative

Impacts
The execution of the privatization program may lead to
certain negative impacts as follows: -
(1) Aggravating the unemployment problem.
(2) Increasing the inflation rate.
(3) Creating monopoly forms.
(4) Maldistribution of resources.