Why are public enterprises (companies owned by the government) privatised?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

The major reason for privatization is the idea that the government cannot run firms as efficiently as the private sector can.  When companies are owned by the government, the actions taken by the companies are often influenced not by economic factors but by political factors.  In other words, instead of seeking out the best ways to make the most possible money, government-owned companies will do things that help the political leaders of the country keep power.  This leads to less efficiency and slower economic growth.

When countries privatize industry, they do so in order to make their economies more efficient and better able to grow.

nikasho0100's profile pic

nikasho0100 | Student, Grade 12 | (Level 1) Salutatorian

Posted on

As there are advantages that could be gained as

1. As the new owners operate the business with the profit as the main aim. This encourages the business to run more efficiently.

2. Competition may now be encouraged therefore again increase efficiency plus prices could be set low.

3. The sale of businesses to pvt owners raise money for the government.

4. Important business decisions will be made for business reasons-not by governments with political mind.

5. New owners may have additional capital to invest in improving the services offered by the business. as government can be short of money.

6. Government can also collect tax revenue from the privatized businesses.


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