Difference Between Privatization and Disinvestment

What is Privatization?

The term privatization refers to the process, which involves the transfer of ownership, control, or management of a business, enterprise, or public service from the government or the public sector to private ownership or control. In other words, it involves selling the assets held by the government to the investors or to a private corporation. For example, the government can just sell a public company, utility, or even infrastructure to some interested private parties. Privatization is aimed at ensuring greater efficiency and competitiveness, reducing the level of government’s involvement in the economy, and increasing its revenues....

What is Disinvestment?

Disinvestment is the process of lowering or giving up ownership or financial links to a particular asset, usually by selling shares or securities. Public or government bodies frequently engage in it when they want to reduce their role in state-owned businesses or liberalize markets. Rather than holding total authority, the government chooses to sell its stake in these businesses. Disinvestment can be done for a variety of reasons, such as funding other initiatives, reducing budget deficits, increasing the effectiveness of public sector undertakings (PSUs), and encouraging investment from the private sector. Disinvestment strategies include selling shares on stock markets, making selective sales to private investors, and initiating public offerings (IPOs)....

Difference Between Privatization and Disinvestment

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Conclusion

In Conclusion, while both privatization and disinvestment are associated with the sale of government-held shares, they differ significantly in terms of objectives, extent, and results. In particular, privatization usually results in transferring ownership and all rights to the private sector, which allows obtaining considerable profit and excludes any influence of the authorities on the company . Conversely, disinvestment implies that the government only sells a part of their share in a company and, thus, can both maintain a particular level of control over a firm and benefit from an amount of money . Both these procedures have their own purposes and may be utilized depending on the goals and strategies of a government....

Privatization and Disinvestment – FAQs

How do ownership transfer details differ in privatization and disinvestment?...