PRIVATIZATION

OF
PUBLIC SERVICES
Public enterprises are industries
created officially for the
economic development,
enhancement and protection of
the national interest and
institutional response to specific
problems.
-Briones 1985
WHAT ARE
PUBLIC
ENTERPRISES?
Article XIV, Section 6 of the 1973
Constitution sets the general policy
and framework.

"The State may, in the interest of

national welfare or defense,
establish and operate industries and
means of transportation and
communications, and, upon payment
of just compensation, transfer to
public ownership utilities and other WHAT ARE
private enterprises to be operated by
the Government." PUBLIC
ENTERPRISES?
Privatization occurs when a
government-owned business,
operation, or property becomes
owned by a private, non-
government party.
Services often remain, they can
be delivered on for profit basis
than strictly operated for public
benefit.

The state recognizes the role of

private sector on national growth.

PRIVATIZATION
METHODS OF
PRIVATIZATION
Share Issue Privatization
selling shares on the stock market

Asset Sale Privatization

selling entire organization to a
strategic investor by auction

Voucher Privatization
distributing ownership to all for free
or at a lower cost
 Contracting Out:

Production of service by private firm under

a contract
under this scenario, the private sector firm
is paid directly by the government

Franchising:
METHODS

Government awarding a rights to perform

services within a specific geographic area to
a private firm.
The private firm generates revenue by
collecting user fees
SUB

Open Competition:

Many private firms are allowed to compete

for customers within a governmental
jurisdiction.
VARIATIONS IN PRIVATIZATION

1. Private 2. Public sector 3.Deregulation

sector choice of of private firms
choice for financing with
the private sector
production operations
of services
Govt. reduces or
Entire responsibility Joint activity of eliminates the
transferred from public and private regulatory imposed
public to private on private.
 SECTOR
VS. PRIVATE
PUBLIC SECTOR
Public Sector Private Sector

Government agencies Enterprises not run by the

generally run operations government comprise the
and industries within the private sector. Private
public sector. In the companies include the
Philippines, the public majority of firms in the
sector includes National consumer discretionary,
Government Agencies consumer staples, finance,
(NGAs) and its attached information technology,
agencies, bureaus, local industrial, and real estate.
government units (LGUs),
and government-owned
and controlled
corporations.
Privatized Enterprises 9in the Philippines:
 What are the reasons?
Why privatize public enterprises ?
WHY
PRIVATIZE? 1. Reduce government
involvement in commercially
viable activities.

2. Increase efficiency in the

delivery of programs

3. Provide competition

4. Address government's
absorbative capacity
The Free Market
Economy

A free market economy which is also known as laissez-

faire economy is an economy in which all resources are
owned by individuals. 50

40

30

20

10

0
Item 1 Item 2 Item 3 Item 4 Item 5

The decision about allocation of the resources are made by

individuals without governmemt intervention.
 Economy will comparatively work
and function well if the government
will leave people alone to buy and
THE INVISIBLE
sell freely among themselves.

In a free market scenario

He assumed that an economy can work

no regulations or restrictions
well in a free market scenario where
imposed by the government everyone will work for his/her own
if someone charges less, the interest.
HAND

customer will buy from him.

He suggested that if people were allowed
to trade freely. Self interested traders
present in the market would compete
Therefore, you have to lower your price
with each other, leading markets towards
or offer something better than your the positive output with the help of an
competition. invisible hand.
BENEFITS OF FREE MARKET ECONOMY

GREATER INNOVATION GREATER ECONOMIC GREATER ECONOMIC

DUE TO COMPETITION GROWTH FREEDOMS

Spurs companies to develop Economies of scales and free Incentivizes stakeholders

better products at a lower trade has boosted production such as entrepreneurs,
costs, offers consumers more and increased employment. investors and financers to
choices. take active part in business
and help the economy
grow.
 1. Improved efficiency
2. Lack of political interference
3. Short term view
4. Increased competition
5. Specialization
6. Less prone to Corruption
7. Access to Capital

Benefits of Privatization
IMPROVED
EFFICIENCY

Private company
have profit
incentives to cut
costs and be more
efficient.
In Government run
industries,
managers do not
usually share any
profits, however, a
private firm is
interested in
making profit and
so it is more likely
to cut costs and be
efficient.
 Government companies can be motivated by
political pressures rather than sound
LACK OF economic and business sense.
POLITICAL
INTERFERENCE Goals are economical rather than "political"
A government may think only
in terms of next election.
They may be unwilling to
invest in infrastructure
improvements which will
benefit the firm in the long
term because they are more
concerned about projects that
give a benefit before the
election.

SHORT TERM
VIEW
Policies to allow more firms to enter
the industry and increase the
competitiveness of the market.
Increase in competition that can spur
improvements in efficiency.

INCREASED
COMPETITITION
Additional benefits in Privatization

LESS PRONE TO
SPECIALIZATION CORRUPTION ACCESS TO CAPITAL

Focused on human and A government monopolized Private can sometimes

financial resources into function is prone to make it easier to raise
specific function. corruption. investment capital.
Less budget concern to
the government
 1. Abandonement of social obligation

2. Inability of public control

3. Clear accountability

Disadvantages of Privatization
Disadvantages in Privatization

ABANDONMENT OF INABILITY OF PUBLIC CLEAN

SOCIAL OBLIGATION CONTROL ACCOUNTABILITY

Cutting services to those The public does not have Managers of privatized
less able to pay or a service any control over the enterprises are
area is not profitable. private. accountable to share
The government should do holders and consumers.
more to safeguard itself Enterprises will exist as
against opportunistic long as needs are
behavior of the companies satisfied.
STAKEHOLDERS
ROLES OF

GOVERNMENT PRIVATE ENTERPRISE

To provide good policies and fair Implement best practices to

and transparent frameworks increase efficiency and seek
opportunities in the bottom of the
pyramid to serve the poor
KEY TAKEAWAYS

Privatization describes It generally helps The success of

the process by which a governments save Privatization is reliant on
piece of property or money and increase the two stakeholders: the
business goes from efficiency, where government and the
being owned by the private companies can private enterprise.
government to being move goods quicker
privately owned. and more efficiently.
CONCLUSION "The privatization program has
proceeded less swiftly than
interested parties may desire, but
Should the due care must be exercised i the
government disposition of assets that belongs
privatize? to the people. We must get the
most we can to the people, in as

fair and transparent manner as

possible, leaving no room for the
smallest possible doubt about the
integrity of the procedure and the
people involved..."

-President Corazon C. Aquino

THANK YOU