Q-21 = Why privatization became necessary for Pakistan.
WHY PRIVATIZATION?
Privatization is a process by which government owned factories and services are transferred to private sector by their sale. The foreign investors can also purchase these industries and services. In order to sale government enterprises open bids are invited from the private sector. In some cases shares of the enterprises are sold through Stock Exchanges. Deregulation means reducing the rules and regulations and to make investments easy for the local and foreign investors. Now any foreign national can set up his factory anywhere in Pakistan without going through a complicated procedure of government permission.
ADVANTAGES OF PRIVATIZATION
1. Increase in efficiency and profitability
2. Increase in foreign investment and in export earnings
3. Broadening the base of share capital and stock market
4. Decrease in political pressure on the management of enterprises
5. Use of latest technology and know-how by private sector
6. Decrease in deficit financing, no more government funding will be needed
1. INCREASE IN EFFICIENCY & PROFITABILITYMost of the Govt. industries and services are inefficient and are running in losses, when these will be transferred to private sector, their administration will improve and non-development expenditures will be reduced, their efficiency will increase and these enterprises will be converted into profitable ventures.
2. INCREASE IN FOREIGN INVESTMENT & EXPORT EARNINGSPrivatization will increase foreign investment when foreigners will purchase them. Their production will increase which will earn more foreign exchange for Pakistan and if these enterprises are set up by foreign loans, these loans will be repaid out of the sale proceeds, which will reduce the burden of foreign loans.
3. BROADEN THE BASE OF SHARE CAPITAL & STOCK MARKETSale of enterprises through stock exchanges will broaden the base of share capital hence stock market will develop, because general public will be in position to purchase their shares and investment opportunities for general public will increase
4. DECREASE IN POLITICAL PRESSUREThere are always political pressures on Govt. owned industries, banks and other institutions for employment of political workers and loan facilities from banks. When these enterprises will go in the hands of private owners these illegal pressures will be reduced to a great extent.
5. USE OF LATEST TECHNOLOGY & KNOW-HOWPrivate domestic investors and foreign investors will adopt latest technology and know-how for the increase in output and their profits. This will result in the increase in national product, thus national income of the country will grow.
6. DECREASE IN DEFICIT BUDGETING & INCREASE IN INFRASTRUCTUREGovt. enterprises usually run into losses and to keep them going, Govt. provides funds every year. After privation Govt. need not to resort to deficit financing and the funds provided to these enterprises will be utilized for construction of social infrastructure of the economy.
WHY PRIVATIZATION?
Privatization is a process by which government owned factories and services are transferred to private sector by their sale. The foreign investors can also purchase these industries and services. In order to sale government enterprises open bids are invited from the private sector. In some cases shares of the enterprises are sold through Stock Exchanges. Deregulation means reducing the rules and regulations and to make investments easy for the local and foreign investors. Now any foreign national can set up his factory anywhere in Pakistan without going through a complicated procedure of government permission.
ADVANTAGES OF PRIVATIZATION
1. Increase in efficiency and profitability
2. Increase in foreign investment and in export earnings
3. Broadening the base of share capital and stock market
4. Decrease in political pressure on the management of enterprises
5. Use of latest technology and know-how by private sector
6. Decrease in deficit financing, no more government funding will be needed
1. INCREASE IN EFFICIENCY & PROFITABILITYMost of the Govt. industries and services are inefficient and are running in losses, when these will be transferred to private sector, their administration will improve and non-development expenditures will be reduced, their efficiency will increase and these enterprises will be converted into profitable ventures.
2. INCREASE IN FOREIGN INVESTMENT & EXPORT EARNINGSPrivatization will increase foreign investment when foreigners will purchase them. Their production will increase which will earn more foreign exchange for Pakistan and if these enterprises are set up by foreign loans, these loans will be repaid out of the sale proceeds, which will reduce the burden of foreign loans.
3. BROADEN THE BASE OF SHARE CAPITAL & STOCK MARKETSale of enterprises through stock exchanges will broaden the base of share capital hence stock market will develop, because general public will be in position to purchase their shares and investment opportunities for general public will increase
4. DECREASE IN POLITICAL PRESSUREThere are always political pressures on Govt. owned industries, banks and other institutions for employment of political workers and loan facilities from banks. When these enterprises will go in the hands of private owners these illegal pressures will be reduced to a great extent.
5. USE OF LATEST TECHNOLOGY & KNOW-HOWPrivate domestic investors and foreign investors will adopt latest technology and know-how for the increase in output and their profits. This will result in the increase in national product, thus national income of the country will grow.
6. DECREASE IN DEFICIT BUDGETING & INCREASE IN INFRASTRUCTUREGovt. enterprises usually run into losses and to keep them going, Govt. provides funds every year. After privation Govt. need not to resort to deficit financing and the funds provided to these enterprises will be utilized for construction of social infrastructure of the economy.