- Privatization is the economic, political, and social issue where the ownership of the government of the public enterprises (PEEs) is transferred to the private sector partially or fully.
- So, it is an act or initiative where the government’s ownership of the PEs is transferred to the private sector.
- The privatization is said to begin from the early 1080s to minimize the government’s burden and expand the private sector in economic activities.
- The wave of privatization became wider after 1990 as the liberalization became more comprehensive globally.
- To date, privatization has been carried out by most of the economies irrespective of their size and ideology.
Privatization in Nepal (Process of Privatization in Nepal)
- Nepal initiated privatization after the restoration of the multiparty system in 1990.
- As a part of comprehensive market-oriented reform, the government of Nepal started privatization.
- The Privatization Act 2050 governs privatization in Nepal, though privatization was started in 2049 prior to the enactment of this act.
- The Privatization Act 2050 has identified various modalities of privatization in Nepal, such as:
- Sale of shares of PEs to the general public, employees, and private investors
- Formationof Co-cperatives or conversion of PEs into a cooperative of multiple stakeholders.
- Lease out the assets of PEs.
- Sale of only the asset or business, or both, to the private sector.
- Management contract of the PEs by the private sector
- Any other modality approved by the government.
- The Privatization Act 2050 has the provision of a privatization committee chaired by the finance minister or state minister for finance, with the members as secretaries of the Ministry of Finance, Ministry of Law, Ministry of Labor, a secretary from the concerned ministry of public enterprises, member from the National Planning Commision (NPC), member of parliament, and representative from the private sector bofy such as FNCCI, CNI.
- This privatization committee makes policy regarding privatization and recommends the enterprise for privatization to the government of Nepal.
- In order carry out privatization, in the first step, the government identifies the enterprise for privatization, and publishes the official notice in Nepal Gagdet (नेपाल राजपत्र).
- Then there is the evaluation of the enterprise by the committee of expert which evaluates the assets and liabilities, market value, profit and loss position, and future production and potential profitability.
- The privatization committee invites proposals from interested groups by deciding the appropriate modality of privatization based on the recommendation of the expert committee.
- The interested individual, group, or company submits their proposal which is evaluated by the expert team and finally selected as the best proposal for privatization.
- The privatization committee recommends the selected proposal to the cabinet, and finally, the government approves, and the privatization is carried out.
Rationale/Importance of Privatization in Nepal
- Minimize the financial and administrative burden of the government.
- Improving the efficiency and productivity of the enterprise.
- Promotion of the private sector or the market.
- Efficient utilization of the resources of the enterprise.
- Technology transfer and development.
- Improvement in the quality of the product and a reasonable price.
- Enhance the productivity of labor and industrialization.
- Avoidance of political interference and improvement in corporate governance.
- Allow the government to focus on strategic and priority issues such as governance, infrastructure development, etc.
- Align with the regional and global economic reforms.
- Avoid the pressure from the trade union for determining the wage rate and facilities.
- Promote investment and capital formation in the enterprise.