As a result of the disadvantage of public enterprise,the 1980s saw a new policy of privatization being introduced in the advanced countries.For Similar reasons and more so because of instructions from the IMF and World Bank,most low-income developing countries have since been forced into privatization of their public enterprise.
privatization means the sale of state -owned industries, enterprises and related assests to private investors.In other words,it is done through the formation of a public limited company and the sale of its shares to private investors.
There some reasons for the cause of privatization,one is to improve the efficiency of thw state: As part of their anti- inflationary policy, governments often prevent state contrilled industries from raising their prices.The firms that produce these goods cannot cover their costs of production and they tend to be inefficient.As privitalised business,these firms would charge free market prices,which it ia aegued , would lead to improved allocative efficiency.provitization makes firms efficient in a country.
another reason is to reduce waste and disguised unemployment: Privatization is usually adopted as a policy which aim at reducing the financial burden on the government and to reduce disguised unemployment associated with state enterprise. A significant proportion of government revenue is used to support inefficient state enterprises.Indeed,where state enterprises incur loses for a long time, privatization is considered a good policy.
