COMMERCIALIZATION AND PRIVATIZATION. Definition of commercialization and privatization: Commercialization is a policy geared towards making state-owned enterprises to become more efficient and profit-oriented. The policy makes it possible for public enterprises to become more viable and effective.
Privatization on the other hand is a policy designed to enable individuals and private or corporate organization to take over the ownership and control of government business such as public companies and corporations.
Reasons for commercialization and privatization
The reasons why government of West African countries has found the policy of privatization attractive include the following.
- Efficient management: Commercialization and privatization help to develop a good and efficient management of enterprises
- Participation of private individuals: They also assist individuals to participate in economic activities through ownership of enterprises
- To generate more revenue: They assist the government to generate more revenue
- Autonomy of enterprises: It helps to provide autonomy for the enterprises
- Removal of unproductive enterprises: They also assist to remove or disinvest from unproductive enterprises in the economy
- To redirect resources: Privatization helps to redirect resources form businesses to other pressing areas of the economy
- To attract foreign investment: Privatization helps to attract foreigners to invest in the economy because of attractive profits expected
- To minimize wastages and corruption: Privatization helps to reduce wastage and reduce corruption in the system
Attractive of foreign technology and expertise: Privatization assists in attracting foreign technology as well as expertise from developed economics
- It fosters rapid economic development: It also aids the rapid economic development of a country as al productive activities are geared towards efficient production
- Improvement of standard of living: Privatization also raises the general standard of living through sale of shares to small investors
- Generation of employment opportunities: Privatization helps to generates employment opportunities to several people in an economy
Advantages of commercialization and privatization
- Reduction in public expenditure: commercialization and privatization help in reducing public expenditure on enterprises that are not viable
- It promotes efficiency: Commercialization and privatization do help to promote efficiency in production
- Generation of more revenue: Both policies equally help to boost the generation of revenue for the government
- Emergence of innovations: The existence of competition in the industries assists in the emergence of innovations
- Better choice by consumers: Both policies do assist the consumers to have a wide range of choice where there are abundant products== commercialization and privatization
Disadvantages of commercialization and privatization:
- Poor standard of living: Commercialization and privatization lead to poor standard of living of the people due to a shift in interest from pure service delivery to profit maximization
- High cost of products: These policies are aimed at profit maximization; hence they are usually associated with high cost of products of goods
- Reduction employment: Many workers are usually laid off when industries are commercialized or privatized
- Uneven distribution of income: Income is often unevenly distributed as few individuals are now in control of the industries
- Loss of consumers’ welfare scheme: Under commercialization and privatization consumer’s welfare are not catered for.