Saudi Airline and the Privatisation Dissertation

Saudi Airline and the Privatisation - Dissertation ExampleHowever, in essence, it refers to the shift of partial or full responsibility for a function performed by the public sector or government to the private sector. The most common usage of the term takes localise when a public sector entity is divested, either through sale or a long term lease, to a private entity (Veljanovski & Bentley, 2008, p. 42). However, technically, the granting of a long term franchise or concession to the private sector investors, where they would build, manage and operate a major project also falls under the umbrella of privatisation. Furthermore, in a third type of privatisation, a government entity retains control of the strategic direction of the public service but allows a private entity to deliver a public service. This form of privatisation is commonly known as knocked out(p)sourcing or contracting (Bortolotti, et al., 2004, pp. 330). Reasons for Privatisation As argued by Megginson & Netter (2 001) that the government usually justifies privatisation with three reasons. First, privatisation generates r til nowue which could be employ to reduce the fiscal deficits and give birth off debts. Throughout the history, in times of dire need, huge debts and fiscal deficits, policymakers have resorted to privatisation of the SOEs s that they reduce fiscal deficits and pay off the public debt (Bos, 2011, p. 41). Consider the ongoing example of the European Sovereign Debt Crisis, where countries such as Spain, Greece, Portugal, Cyprus, Iceland and others are facing a difficult time in meeting their debt obligation. Many of the European countries have sold off several public entities to generate much needed revenue. In fact, many countries that have acquired bailouts from multinational Monetary Fund (IMF) and European Central Bank (ECB) have had to sign agreements promising the privatisation of several underperforming public sector institutions. Therefore, in these countries, priva tisation is an attempt at bailing out the government and the SOEs. Second, policymakers might also undertake privatisation to reverse the effects of crowding out within markets and encourage the private enterprises to take the lead. As apparent from the guess of crowding out, when governments, while following an expansionary fiscal policy, increase the size of the public sector, it drives out the private sector from the market (Cashore, 2002, p. 505). More importantly, in several cases, even a moderate increase in public sector might drive out several private entities. Therefore, when public sector entities leave the competitory arena, with their monopoly, concessions, subsidies, unlimited funds and several other advantages, it encourages the private sector to enter the market (Vickers & Yarrow, 1988, p. 52). When the government no longer is there to distort the market, the market forces batten effective and efficient resource allocation, which not only generates employment