SS2 Second Term Government Lesson Note – Public Corporations III

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WEEK 4

TOPIC: PUBLIC CORPORATIONS

CONTENT: (4) Commercialization, Privatization and deregulation of Public Corporations:

(a) Meanings of commercialization, privatization and deregulation.

(b) Reasons for commercialization, privatization and deregulation.

(c) Merit and demerits

Sub-Topic 1: MEANING OF PRIVATIZATION, ETC

Commercialization

Commercialization is defined as the reorganization of enterprises, wholly and partially owned by the government, in which such commercialized enterprises shall operate as profit-making commercial ventures without subvention from the government.

The commercialized public enterprise is encouraged to operate to make profit and sustain their operations: in every form of commercialization be it partial or full commercialization, the enterprise involved will enjoy freedom of operation as a profit-making venture.

Privatization

Privatization is the process of transferring ownership and resources of business, enterprise, agency or public service from the public sector (state or government) to the private sector (business that operates for private profit) or to private non-profit organization. It can also be defined as sales or contracting out of public utilities to private concerns.

Types of Privatization

There are basically four types of privatization. They are as follows:

1. Share Issue Privatization (SIP): This is the method of privatization where the shares of the public corporation are sold in the stock market.
2. Voucher Privatization (VP): This is the method of distributing the shares of ownership to all citizens, usually free or at a very low price.
3. Asset Sale Privatization (ASP): This is the method of privatization where the entire organization or part of it is sold to a strategic investor usually by auction.
4. Privatization from Below: This is the process of starting up new businesses in formerly socialist countries.

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