Privatisation is the incidence or process of transferring ownership of business from the public sector (government) to the private sector (business). In a broader sense, privatisation refers to transfer of any government function to the private sector including governmental functions like revenue collection and law enforcement. [1]
The term "Privatisation" also has been used to describe two unrelated transactions. The first is a buyout, by the majority owner, of all shares of a public corporation or holding company's stock, privatising a publicly traded stock. The second is a demutualization of a mutual organization or cooperative to form a joint stock company.[2]
Origin of the term
It has been claimed that the term was first used in the 1930s by The Economist in covering German economic policy.[3][4]
[edit] History
In Ancient Greece, the government contracted out almost everything to private sector.[5]
In Roman Republic, private individuals and companies supplied nearly everything, including tax collection, supply the army, religious sacrifices and construction. However, Roman Empire created state-owned enterprises. For example, much of the grain was eventually produced on estates owned by the Emperor. Some scholars suggest that the cost of bureaucracy was one of the reasons for the fall of Roman Empire.[5]
Churchill's government privatised British steel industry in the 1950s. West Germany's government started a large-scale privatisation, including selling its Volkswagen majority share to small investors in a public share offering in 1961.[5]
[edit] Types of privatisation
There are three main methods of privatisation:
• Share issue privatisation (SIP) - selling shares on the stock market
• Asset sale privatisation - selling the entire firms or part of it to a strategic investor, usually by auction or using Treuhand model
• Voucher privatisation - shares of ownership are distributed to all citizens, usually for free or at a very low price.
Share...