The economies of many countries have recently witnessed a set of changes that have greatly affected their paths and trends, so what is privatization?, a question posed by some, which is answered by one of the legal experts from the Othman Office, and to say that privatization is a contractual relationship between the state and the private sector by introducing the administrative expertise of this sector in the activities of public enterprises and managing them according to the method and functioning of the private enterprise.
Also, dear reader, you will move with us in many stations about privatization, and the types of privatization, including total privatization, partial privatization and privatization of management contracts, and what are the reasons for privatization, and the difference between transformation and privatization?, and what sectors have been privatized?
What is privatization?
Privatization is the transfer of property belonging to state institutions in the public sector, i.e. the government, or the services and works they provide to the private sector, in whole or in part, with the aim of stimulating government activity, whether productive or service, and this may come after the abolition of all legal restrictions imposed on competition between the government and private sectors.
What are the types of privatization?
Privatization may take many forms and types, but it may serve one goal, which is to transfer public ownership from the government sector to the private sector to enhance the efficiency of the services or products it provides that bring them profit, including what is privatization and its following types:
1- Total privatization
This may mean that total privatization is the transfer of ownership of public enterprises entirely from the government sector to the private sector by selling all capital shares and institutions to the public.
2- Partial privatization
Partial privatization may take place by transferring part of the ownership of public enterprises in the public sector to the private sector, by selling part of the institutional capital shares to the public.
3- Privatization of management contracts
It is to privatize management contracts by transferring the management of public enterprises belonging to the public sector to the private sector, with ownership remaining owned by the state, i.e. in the public sector.
The last type is to allow the addition of new shares in the institution, by opening the door to contribute to the capital of the institution to the private sector.
What are the reasons for privatization?
There are many cases and reasons behind the occurrence of privatization, and this may be done because there is a desire from the government to end its tasks in certain places, and it may resort to this tool when negatively affecting stock prices, as many companies need to completely restructure some of their business operations to improve their impact on shares, and privatization may occur when there is an offer to buy these institutions or in cases of the institutional merger.
What are the objectives of privatization?
Privatization in the government sector may aim to achieve many productive advantages and services provided by institutions and are as follows:
1- Raising the rate of economic growth.
2- Exploiting government institutions that do not bring profit to the state and reducing the financial burdens borne by the state’s general budget in order to support institutions to ensure their continuity and compensate for their losses.
3- Facing the budget deficit by providing resources to the state treasury through the proceeds of the sale of public institutions.
4- Activating the role of the private sector in the development of the economy through the services or products that the privatization provides.
5- Work to reduce financial and administrative corruption as the government sector is more vulnerable to corruption than the private sector.
6- Achieving the inverse relationship between the profits achieved due to the strength and efficiency of the services provided by the private sector and the tax
6- And also to activate many projects, activities or other practical offices, such as advertising, performance evaluation and other projects related to the facility.
What are the disadvantages of privatization?
What is privatization and its disadvantages, which is that the privatization process leaves negative effects on many groups of society, which we will mention below:
1- The high rate of poverty and monopoly rate of projects due to their privatization and the amounts of money spent in the conduct of their activities.
2- Neglecting the public interest because the private may care about money, which leads to the deterioration of some public services for citizens of the middle and lower classes.
3- High inflation rates.
4- Lack of democracy and the state of social and economic equality.
What is the difference between transformation and privatization?
First: Privatization
Privatization, which means the transfer of the target entity, which is the sector or department, to the private sector, but the conversion is by transferring from one work system to another or from one government department to another, which targets the transformation and privatization system in achieving the requirements and strategy, which is based in its most important vision on activating the role of the private sector as a key partner in development.
Privatization internationally may be linked to professional advancement and quality of services and follow-up and evaluation of those working in job opportunities offered to reduce disguised unemployment in the sectors, and thus government sector officials may devote themselves to directing their efforts, investing their efforts, and investing their sector’s budgets and resources in order to improve the performance of the institutional sector and modernize and develop legislative systems and regulations.
Privatization may contribute to reducing the administrative burden, which works to control the financial and technical spending of the state and ensure the efficiency of operation of business in sectors and for all services.
Second: Transformation
It is that the transformation is the mechanism of its implementation and entitlements as it affects employees in the government sector offered for transfer or privatization, and the transfer is for the entire sector or part of it and from the civil service system to the social insurance system.
In the sense that all employees in the sectors proposed for transformation, and their employment is by the employment contract, the duration of which is determined by the entity in which the employee works, and his performance and promotion are evaluated according to standards and arrangements, and coordination is made by the entity in which the Ministry of Human Resources works:
First: Official Publication
Based on the official publication on the subject from various sources, which includes all state employees of the sectors offered for transformation and privatization, and are as follows:
All government employees after being transferred from the civil service system to the social insurance system shall continue their work for a period of not less than two years with their basic salaries and previous entitlements without change, and the employment contracts of any of the workers shall not be terminated within two years.
After two years, their performance is evaluated according to criteria that are agreed upon by its decrease or dismissal, and the dispute may be resolved to the administrative or labor courts, as the case may be.
Second: Civil Service
What is privatization, and if his civil service has reached 25 years or more, he may choose between
Early retirement and receipt of all end-of-service benefits, whether amounts and bonuses or from vacations, and setting the end of service gratuity at 16% of the salary, and no more than four salaries for sectors where there is no specific system for end-of-service gratuity, but in sectors that do not have end-of-service gratuity, such as universities, their bonuses may be paid if they choose early retirement.
Non-retirement for those who have completed service of 25 years or more, and their previous civil services may be linked with their future services under the social insurance pattern.
Third: Those whose civil service is less than 25 years
He may choose between:
- Liquidating his retirement rights with the Public Pension Agency and taking his entitlements, which are the end of service gratuity and others, then joining a new work contract with the same entity in which he works, provided that
- Not to liquidate his retirement rights and may join the same entity in which he works, but under an employment contract, and may be subject to the social insurance system, and that his previous service is included in the future under the social insurance pattern.
Fourth: Transformation from the Civil Service System
Whoever does not want to switch from the civil service system to the social insurance system and wants to continue in government work, he may choose between:
- To look for another department in the sector in which he works that is not covered by the transfer system, meaning that he will be on the civil service system to which he is transferred if he finds an opportunity there and his request has been accepted, and this may be linked to the issuance of a decision by the entity in which he works.
- It is to look for work in another sector outside the sector in which he works in another ministry or in a sector that is not covered by transfer or privatization, and his services are transferred to him.
- The employee is given an average of eight hours per week or a day for a period of six months for research and may be extended to another six months by a decision of the minister or the president, and if he is found in another sector or a department, he may be transferred to it, and if he does not answer another opportunity, he has two options, namely accepting the transformation system, terminating his service, or being dismissed.
What sectors have been privatized?
It is that the sectors that have been privatized, which can be defined for what is privatization, the center develops the economic environment, and applies the general framework for privatization sectors, assets and government services, and based on the recommendation of the center, the Council of Economic and Development Affairs, which may be added to the sectors or bodies to the privatization programs:
- Education sector.
- Industry and Mineral Resources Sector.
- Environment, Water and Agriculture Sector.
- Health sector.
- Housing sector.
- Labor and Social Development Sector.
- Municipalities Sector.
- and the public transport sector.
- and the communications and information technology sector.
- Energy sector.
In the end, we have explained to you what privatization is, and that privatization has taken multiple forms and has made most of the developed or developing country that pushes towards the privatization of their public property, to get rid of surplus institutions and reduce their expenses, and to learn more about privatization, you may inquire from Al Othman Law Firm for more legal inquiries and consultations.
