subject: STRATEGIC IMPACT OF PRIVATIZATION IN SERVICE SECTORS-A CLOSER LOOK [print this page] STRATEGIC IMPACT OF PRIVATIZATION IN SERVICE SECTORS-A CLOSER LOOK
Introduction:
In this competitive age, many countries in the world facing several crisis and lack in concentration of developing their economy due to the cross-border terrorism, unstable in political environment, poor utilization of wealth resources, increase in population and poor concentration on agriculture. Such causes led these countries to be in struggle to take immediate and remedial measures to develop their economy and to satisfy the society. The basic economy structure of the country may significantly differ from each other because of imbalance in their regulation of business and other activities. In order to remove such obstacles, the world trading organizations discovered the new dimensional policies to maintain the balance between the countries in trading and other activities. These policies generally called as LPG policies such as Liberalization, Privatization and Globalization. The main objectives of these policies is not only to provide and maintain the equality in business and other activities but also to make standardize in the work and satisfy the global customers.
Today, the policy of privatization became significant role in the development of every country's economy. Brian Atwood (1995) opined, "Privatization ultimately involves power-and equity-and not just equity in terms of ownership, but social equity, the fundamental fairness and openness of society." Privatization policy is now made successful and tremendous development in various sectors. Especially in service sectors its contribution is unlimited one. The service sectors such as transport, insurance, tourism, banking, telecommunication, hospital and public utility, etc. had a major impact by the privatization policy. The main scope and impact of privatization in these service sectors is the outcome of the effective service to the society at reasonable cost. So with the above view the author is attempting to present the impact of privatization policy made remarkable changes in the growth and development of these service sectors and benefits over them based on observation and review of relevant literature.
Privatization: A dimensional concept
J.A. Kay and D.J. Thompson (1986) stated, "The privatization is used in a much wider then sense to cover several distinct relationships between the government and the private sector such as de-nationalization (sale of public assets), deregulation (introduction of completion into regulated sectors), and contracting out (franchising to private firms of state financed goods and services). The key concept of the above definition is that privatization is transformation of governance of public sector to the private operators.
Dramatic growth of privatization in various sectors:
During the last few years, the privatization policy becomes significant and dramatic growth and development in the field of various sectors. Especially, the field such as agriculture, finance, infrastructure and industry are achieved higher level of revenue. P.G. Babu and Nibedita Das (1999a) stated, "The scale and speed of privatization can be judged from the fact that in the emerging markets revenue from privatization has grown dramatically over the past ten years". The following comparative table shows the sector wise revenue generated globally from privatization in emerging markets from 1990 to 1996.
Global Privatization Revenues by Sector 1990-96
(US $ million)
Sectors
1990
1991
1992
1993
1994
1995
1996
Total
1. Infrastructures
9704
6863
9715
5360
9399
9240
15,201
65,481
2. Industry
1402
5558
7188
7491
6091
5787
3546
37,063
3. Agriculture and Mining
1367
3608
3394
6215
4068
4336
2787
25,776
4. Financial services
47
7793
5263
3411
1065
1993
2671
22,182
5. Other services
138
420
621
1184
1088
606
1108
5165
Total
12,658
24,242
26,181
23,661
21,712
21,901
25,313
155,667
Source: P.G. Babu and Nibedita Das, 1999b, Privatization and Auctions', In India Development Report 1999-2000, Edited by Kirit S. Parikh, New Delhi, Oxford University Press, pp.268.
From the above comparative table, it proves that in the year 1996, the privatization generated 25, 313 million dollars as revenue from various sectors as compare to the year 1990 that was only 12,658 million dollars. It is evident that privatization laid a strong foundation in the development of the various sectors.
Strengths over Privatization:
The strong implementation of Privatization policy provides several strengths over the various sectors are:
Promotes Competition advantage.
Improve standard in quality of work life.
Creates and adopt innovative services.
Reduce delay in time for service.
Encourages adoption of new technologies.
Optimum utilization of work force.
Improve customer service.
Provides greater employment opportunities.
Weaknesses over Privatization:
On other side, there are several weaknesses of the privatization policy over the various sectors are:
Loose of government control over the authority of the sector.
No Guarantee for Price stability.
Impact of Privatization on Banking Sector:
Banking service became lifeblood of the country and a part of every human life for financial transaction and maintains their account safely. In earlier days, the governance of banking sectors is in the hands of private operators. During the period of Indira Gandhi government, all the banks are been nationalized and under the control of Indian government for the benefit to Indian societies. But even the nationalization fails to prove the success in the process of adopting technology and the changing business and societies needs as these are result in outcome of the low speed of transaction process and also unable to retain the existing customers. Today, the public as well as private sector has been found owing, managing and controlling the banking services. It is right to mention that privatization policy made a way to expand scope of banking services in almost all the countries with new application of technology, such as ATM banking, E-banking, Credit and Debit card system, personal banking, etc. which enable to perform banking services at any place and as to the convenient for the society. It also provides greater scope of banking sectors in creating more employment opportunities and made as challenges to the public sector banks. On the other side, the privatization leads the banks unable to provide their effective service at reasonable cost and retain loyalty of the society. For example Some Private banks had raised minimum amount for opening account from the public, after privatized the banking services by the government and charges for service also too high as compare to public banking sectors. It also failed behaving in such a way to recover the loans from their customers
Impact of Privatization on Telecommunication sector:
Telecommunication sector is one of the most important service sectors in creating the network of various countries in the world. In our Indian context, the government had privatized the telecommunication service to the private operators before some years due to the advent of global advanced technology. Indian private operators such as, Tata, Reliance, Airtel, Satyam, Aircel, Hutch were stepped successfully in the market and providing telecommunication services effectively to the business and society. At the same time there is no price stability for offering telecom services by the private telecom operators. And some of the private operators also failed to retain their existing customer through inefficient in response to the technical problems of customer. For example, it is failed to concentrate on entire coverage as effectively provided by the BSNL, government-undertaking operator.
Impact of Privatization on Tourism sector:
Tourism service provides an instrumental way of generating revenue to the government in every country. The tourism sector helps in way to share the culture, heritage, religion, enriching the knowledge about the traditional values of the country, generation of foreign exchange, etc. As the result of privatization policy in tourism sectors, many allied sectors had been developed such as, transportation, hotel, availability of travel agents, tourist guides etc, that results in creating more employment opportunities to the surrounding people and develop their standard of living. But today, till the tourism sectors need more improvement its services and create more awareness with new ideas and operations in order to attract and satisfy the society. This can be done only by the way of privatization. In our Indian context, tourism sectors are in critical condition because the amalgamating components lack world class excellence and the policy makers appears least interested in making them competitive. S.M.Jha (2003) says, "Indian tourism contributes only 0.40 percent as compare to world class potential". So, only by privatizing which helps Indian tourism to bring higher contribution as compare to world-class excellence.
Impact of Privatization on Transportation sector:
At present moment, transportation service is the backbone of the country, which helps to interconnect its various parts. In many, European and American countries, privatization provides significant and tremendous development in the field of transportation sectors. In our Indian context, the Tamilnadu government had planned to privatize some of the transportation routes in chennai and other districts were the government does not get enough revenue, and Government of India decided to handle the maintenance and customer oriented process to the private operators. The main aim of privatizing the transportation sectors is to provide sufficient facilities, reduce delay in time, maintain and provide smooth service to the society. But till the railway service stood successfully over the privatization and it is amazing that, the railways sector overcame from the loss to profit zone with the new revolutionary ideas of Mr. Laloo Prasad Yadav, Minister of Railways department.
Result:
The result of the study reveals that the advent of privatization policy in service sectors such as banking, telecommunication, tourism and transportation had tremendous changes, merits and drawbacks. This study also elucidated that the privatization made a greatest impact in the service sectors with the hands of modern technology and improves the service in effective and excellent one according to the changes in needs of the society.
Conclusion:
In concluding that the author highlighted his views about the impact and changes of privatization in various service sectors. The consequences of privatization in the various service sectors discussed above, which leads to greatest change and develop the lifestyle of the society through fulfilling their needs. Hence, this study also serves as guidelines to other researchers who wish conduct further work in this area and also provides effective information to everyone.
Reference:
Babu P.G. and Nibedita Das, 1999a, Privatization and Auctions', In India Development Report 1999 2000, Edited by Kirit S. Parikh, New Delhi, Oxford University Press, pp.268. Babu P.G. and Nibedita Das, 1999b, Privatization and Auctions', In India Development Report 1999-2000, Edited by Kirit S. Parikh, New Delhi, Oxford University Press, pp.268. Brian Atwood, 1995, "Privatization, Democratization Linked in Development Process", In Liberalization & Globalization of Indian Economy, Edited by K.R.Gupta, New Delhi, Atlantic Publisher & Distributor, p.131. Jha. S.M., 2003, Services Marketing, Sixth edition, Mumbai, Himalaya Publishing House, p.31. Kay. J.A and D.J. Thompson, 1986, "Privatization: A Policy in search of a Rationale", Economic Journal, Vol.96, p.381.
