Privatisation means the complete or partial sale of state-owned enterprises to private investors, whether selling shares of public companies wholly owned by the state or in joint public-private companies. This economic trend arose with the collapse of the Soviet Union in 1989, when most of the eastern European countries that were applying the socialist system began to transition to market economies.
Following in the same footsteps, developing countries have been adopting more market-oriented trade policies to benefit from economic globalization and the policies and programmes of international financial and economic organizations.
Some consider the privatization system to be tainted by financial and administrative corruption, whether it is in selection of companies that are offered for sale or in the practice of a flawless sales process or in price-setting as well as identifying buyers in ways that reveal corruption. It can also be in using the sale proceeds for purposes for which it is not intended.
But on the other hand, we must realise that purchase of the state’s shares, or part of a publicly traded company by private investors, will work to expand the base of ownership and popular participation in these sectors in a way that helps implement the rules of governance and limits corruption.
Privatization also works to bring more revenues to the State, represented in taxes and fees, and the continuous improvement of the management of existing companies in order to achieve the maximum possible use of energies, human and material resources.
This is in addition to rationalization and restructuring of the current expenditures, increasing efficiency and business performance plus offering better services and products through cost reduction and high quality, with great returns to citizens, relying on freedom of competition and encouraging individual initiatives.
In order for privatization to take place in a proper manner and achieve their desired results, it must be subjected to systematic and repeated economic studies and the most appropriate methods must be chosen for the privatization programme in a balanced manner in which all parties could take into account the varied interests.
Above all, it is necessary to provide a range of recommendations to provide accountability and transparency in the process, by adhering to the scientific method in assessing the value of the assets subject to privatization.
This is in addition to ensuring impartiality in the bidding process, preparing for financial services and capital markets and the stock exchange to be highly efficient, in order to ensure that the privatization process can be implemented in a balanced manner in which all parties take into account the different interests.
This step could be achieved through selling at the best prices to preserve public money, establishing the core relationship skills to develop the performance of companies and learn about setting investing goals with a clear target in mind, in addition to choosing the right time.
There is also a need for transparency in the privatization process by adhering to the scientific method in assessing the value of the assets subject to privatization.
Administrators must adhere to the formal bidding process to ensure impartiality and quality criteria elements listed in the RFP (request for proposal) which will be awarded the contract to buyers, in addition to preparing the capital markets and the stock exchange to be highly efficient, in order to contribute to the privatisation process.