Objectives of Privatisation

The main objectives of privatisation are as follows:

  • To improve the operational efficiency and overall performance of entities proposed to be privatised and to promote competition.
  • To reduce the financial burden imposed upon the Government by public enterprises and to release resources for utilisation on alternate urgent requirements such as those of the social sectors and the development of physical and technological infrastructure, thereby accelerating the pace of industrialisation.
  • To promote and strengthen the capital market by broadening and deepening its base through enlarging the number of share-holders and listing new enterprises.

While we work in support of these objectives, our strategic plan will endeavor to:

  • Safeguard the interests of the consumers by formulating a regulatory framework prior to divestiture, particularly in the case of utilities.
  • Avoid concentration of economic power in a few hands and to secure widespread ownership of assets being divested.
  • Provide reasonable compensation to employees rendered surplus as a result of privatisation and help in their retraining for employment elsewhere.

Creation of a Conducive Economic Environment:

Privatisation is accepted as a catalyst for economic recovery and this represents a clear commitment of the political leadership to the economic agenda of the Government. The Government regards privatisation of public assets as a key feature in creation of a liberal economic environment that fosters domestic and international investment and is conducive to promoting competition.

To achieve that conducive environment, the Government will provide an appropriate framework in which private and public sector efforts, while mutually complementary, aim at increased efficiency by operating independently but vigorously in a competitive environment. The framework will:

  • Remove obstructive legislation and rationalise the network of economic regulations, including fiscal distortions, to permit all sectors to operate on a level playing field.
  • Support, promote, widen and deepen the capital markets to mobilize savings and channel them into productive areas.
  • Allocate available resources for the repair, upgrading and developing of physical and technological infrastructure.
  • Provide better protection for the consumer and the environment by creating one or more independent regulators as may be necessary.

Nevertheless there is a gestation period for economic reforms to take root and for confidence in the new policy direction to develop, during which funds generated from the sale of public assets will provide valuable support for capital expenditure including expenditure on social sectors and infra-structural development.

Retirement of Debt

The Government believes that one of the principal benefits to the nation from privatisation of its public assets is by way of reduction of our public sector debt burden. The burden of domestic and international debt can be reduced from the sale of those very assets for which the debt was partially created.

Privatisation will also obviate the need for raising fresh debt for the rehabilitation and development of public sector industries. An endeavor will be made to make judicious use of the funds generated through the sale of assets instead of allowing them to become part of the general revenues. A substantial portion of the funds will be applied for retirement of debt, besides meeting capital expenditure including expenditure on social programmes and infra-structural development.

Reduction in Fiscal Burden

The annual allocation for subsidies to public sector enterprises continues to be a drain on the nation’s resources. The reduction in subsidies will be possible as assets are sold, which will be a positive contribution in reducing the budget deficit.

Improved Efficiency

The predominant argument for privatisation is that the private sector’s technical efficiency is a pre-requisite to allocative efficiency. It is expected that the process of privatisation will improve the relative efficiencies of all sectors through the promotion of alternative choices, competitive pricing, technological updating and improved services. It is planned to redouble the effort and to rationalize its impact in order to increase the benefits.