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Answer: Privatization can refer to the act of transferringownership of specified property or business operations from agovernment organization to a privately owned entity, as well as thetransition of ownership from a publicly traded, or owned, companyto a privately owned company. For a company to be consideredprivately owned, it cannot secure funding through public trades ona stock exchange. After reaching all-time high levels in 1990s,privatisation in OECD countries remained at high levels in thebeginning of the 21st century. State assets worth close to USD 500billion were sold in the 8 years from 2000 to 2007. At the sametime, it appears that we have entered a “new privatisationlandscape”. The block sales of individual enterprises already incompetitive sectors are, in most countries, a thing of the past.Continued privatisation has taken place in more complex sectorssuch as the network industries, where companies are too large andtoo heavily regulated to be swiftly transferred.

Example of countries that are undergoing privatization of aformerly nationalized industry are Central and Eastern Europe .Behind the overall trends in privatisation since 2000 there areseveral driving forces. One of these is the fact that the largeprivatisation programmes of the formerly communist countries inCentral and Eastern Europe are either nearing completion or, atleast, entering into a more mature phase. The privatisation datareviewed were dominated by the transition process of theseeconomies, but five years on these countries no longer figureprominently. In fact, among them only Hungary hasundertaken large privatisation transactions since 2005.

REASONS OF PRIVATISATION

Recent years have, however, seen a number of “hard nut”privatisation cases, in which governments were caught between thefiscal burdens of subsidising financially unviable SOEs and, at thesame time, strong public and employee resistance to either arestructuring or sell-off of the enterprise. Often the outcome wasto let the SOE operate until it was essentially bankrupt. At thispoint, when the financial distress of the enterprise had becomeobvious to all involved, a strategic (in some cases foreign)investor was invited to buy a significant stake in the SOE for alimited sum and ensure the continued operation of the enterprise,or acquire some of the most valuable elements of its value chain.The efforts to privatise Alitalia and Olympic Airways in 2008arguably fall in this category.

Yes, the underlying policies taken were the best option as In“the new privatisation landscape” privatisation may increasinglyimply a partial opening of SOEs? capital to outside investors withpurposes such as raising the efficiency of an essentiallygovernment-controlled entity by subjecting it to the rigours ofstock market listing and enhancing its financial flexibility byopening new alleys for raising fresh capital. A furtherillustration of this point may be the fact that, while the recoveryin stock prices led to a jump in privatisation activity in theyears up to 2005, the continued increases in 2006 and 2007 didmostly not lead to additional secondary offerings despite the factthat most of the governments concerned had “plenty left tosell”.

(2) Nationalization is the process oftransforming private assets into public assets by bringing themunder the public ownership of a national government orstate.^[1] Nationalization usually refers to privateassets or assets owned by lower levels of government, suchmunicipalities, being transferred to the state. Industries that areusually subject to nationalization include transport,communications, energy, banking and natural resources.Nationalization may occur with or without compensation to theformer owners. Example of a country that is undergoingnationalization of a formerly privatized industry is Bolivia.

• 2006 On May 1, 2006, newly elected Bolivianpresident Evo Morales announced plans to nationalize the country’snatural gas industry; foreign-based companies were given six monthsto renegotiate their existing contracts.
• 2008 On May 1, 2008, the nationalization ofBolivia’s leading telecommunications company Entelwas completed,previously having been owned by Telecom Italia.
• 2010 On May 1, 2010, the governmentnationalized the country’s main hydroelectric plant, therebyassuming control over most of Bolivia’s electrical generation andend-user sales.
• 2012 On May 1, 2012, the Morales governmentnationalized power grid operator Transportadora deElectricidad (TDE), until then 99.94% owned by RedEléctrica de España. TDE owns and runs 73% of the power lines inBolivia.

Nationalization was one of the major mechanisms advocated byreformist socialists and social democrats for graduallytransitioning to socialism. In this context, the goals ofnationalization were to dispossess large capitalists, redirect theprofits of industry to the public purse and establish some form ofworkers’ self-management as a precursor to the establishment of asocialist economic system. Reasons and policies behindnaionalisation were that since nationalized industries are stateowned, the government is responsible for meeting any debts. Thenationalized industries do not normally borrow from the domesticmarket other than for short-term borrowing. If they are profitable,the profit is often used to finance other state services, such associal programs and government research, which can help lower thetax burden.