Sclar (2000) provides a simple definition of privatization as the process of providing public services and goods that will be managed by private entities. While this definition leans more on the transfer of ownership and changes in the mechanism of distribution, this also pushes for issues regarding efficiency and quality. Arguments on which entity should control the public resources also come with the question of who handles it more effectively. As this issue involves the public sector and how the government will run the nation’s resources, the common notion in the process of privatization as the way of earning revenues of private companies create concerns to the public of the real interests behind this move. In analyzing this subject, considering certain conditions is necessary to understand the potential benefits and risks of going through this step.
Due to the Philippine’s move towards development, the increase in government spending is inevitable. This requires a source for a larger budget which can be funded by selling assets. Profits can be obtained from these assets if it will be managed properly but maybe due to the political issues and economic crisis, many of the assets are sold or proposed to be sold to private companies. According to the Department of Finance, the national government reported a budget deficit at P53.22 billion for July 2013 which at that period total a P197.84 billion government expenditures compared to the P144.62 billion revenue that can be exhausted. This situation portrays how the government spends much for different kind of projects and why it ventures in privatizing its assets. Privatization also make it possible to remove all the cost the government has to take in managing public utilities like water, electricity, transportation, telecommunication, etc., This reflects whether our government is poor in terms of management or this is a move through privatization where it reduces its role and make the market function on its own.
The conversion of the industries is also supported by the idea of a free market which limits the government in the market processes. Privatization is backed up by the market strategies and ideologies that focus more on the increase in production efficiency which is the opposite of the government’s function to increase public welfare and solve the problems in the society. This raises the argument of how the private institutions will reflect its effectiveness in distributing products to the level of consumption of the public which is restricted by factors such as income, price levels, etc. This is where the government is suggested to intervene, what kind of agreement it should use to prevent the greed of corporation.
II. Forms of Privatization
Different kind of transaction happens between the two sectors which are significant to consider if we will form a strategic type of privatization. The risks brought by privatization can be reduced in the process of contracting where in the...