CONCEPT, ADVANTAGES & DISADVANTAGES

MR. KIRANPAL SINGH*PRIVATISATION

*Privatisation is the transfer of activities from the public sector (ie: government owned and run) to the private sector.Not all Government Business Enterprises (GBEs) may be privatised, this is because some provide a service and do not have profit potential.PRIVATISATION

*Privately owned firms are usually more cost efficient than public because of the profit motive. There are several examples of unprofitable GBEs which have to be subsidised by taxpayers funds, for example: Australian National Railways.ADVANTAGES OF PRIVATISATION

*Privatisation places risk in the hands of the owners of the business, rather than the community as a whole. Therefore, a profit making tax paying company is not a burden on the community, but an asset to it.ADVANTAGES OF PRIVATISATION

*Privatising government business may make it less subject to red tape and more innovative and responsive to consumer complaints.ADVANTAGES OF PRIVATISATION

*Some claim government run businesses have an unfair advantage over private competitors. They have guaranteed payment of bills, for example: until 1988 Telstra was exempt from payment of customer duty and sales tax.ADVANTAGES OF PRIVATISATION

*Theorists would agree that one strong reason for privatisation is to reduce the situations in which the government is both a player and an umpire.ADVANTAGES OF PRIVATISATION

*Privatisation has a once off advantage, ie: the sales add to that years revenue alone. This advantage should not be over-emphasised as it is a once only situation, a benefit, but not a reason for it.ADVANTAGES OF PRIVATISATION

*Consumers of the goods and services produced by the privatised enterprise would gain from the lower prices and greater availability of the product, as a more cost efficient private operator can pass on these efficiency gains to the market.ADVANTAGES OF PRIVATISATION

*Where competition increases product differentiation, consumers will also be able to choose the good or service most suited to their needs.ADVANTAGES OF PRIVATISATION

*The private sector would take over a greater range of commercial activities, but would use less resources than the public sector. This would free resources for other purposes.ADVANTAGES OF PRIVATISATION

*Improved private sector profitability and its expansion would generate greater tax revenue through growth of the economy rather than through increased tax rates.ADVANTAGES OF PRIVATISATION

*Taxpayers would gain to the extent that public service losses and inefficiencies would no longer be financed from taxation revenue.ADVANTAGES OF PRIVATISATION

*In matters of finance, public sector managers are often not free to make important decisions such as the amount of capital they will raise or what they will charge for their services.ADVANTAGES OF PRIVATISATION

*A private sector board, by contrast, operates with much more flexibility and relevance when making financial decisions.ADVANTAGES OF PRIVATISATION

*Many management practices are determined by rules set down by centralised authorities, such as the Public Service Board. In the view of many, the Australian Broadcasting Corporation is virtually unmanageable under the present rules. Even if it had a perfect board and management it would still have problems.ADVANTAGES OF PRIVATISATION

*In personnel management, for example, management is not free to hire and fire or to pay by performance and result.In industrial relations, the Public Service Board controls the major negotiations.ADVANTAGES OF PRIVATISATION

*In marketing, in many cases public sector enterprises may not move into new products or markets without government permission.ADVANTAGES OF PRIVATISATION

*All government firms carry a service which does not make a profit but provides a service. Some of the services would be lost when privatisation occurs.DISADVANTAGES OF PRIVATISATION

*Sale of Transperth (State bus authority divided into private groups in regional basis) may mean outlying areas receive little or no service, or Telecom being privately owned could mean timed local calls. Australia Post could charge higher rates to send mail to other states or country areas.DISADVANTAGES OF PRIVATISATION

*Transfer of a public asset to private owners means the community might have less say about the direction of the company.Privatisation may cause loss of jobs if the new owners feel the numbers of workers are inefficient.DISADVANTAGES OF PRIVATISATION

*The sales of assets must be accomplished under the right conditions. Sale of GBEs at too low or too high a price is not beneficial to the community.DISADVANTAGES OF PRIVATISATION

*Most people are concerned at the possibility of a private monopoly establishing, for example: sale of Australia Post. If this was to occur then services would be seriously reduced in remote areas.DISADVANTAGES OF PRIVATISATION

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