PRIVATIZATION IN THE NETHERLANDS ANTILLES
Streamlining government is in the general interest
On 6 September 2005, Japan announced that it had completed the 20-year privatization of the nation’s biggest telecommunications company. This is the result of Japans ongoing effort to shrink government. In the past decade, about 50% of privatization activity took place in Latin America and the Caribbean. Privatization is still a hot issue.
Many governments are, directly or indirectly, involved in enterprises like airlines, telecommunication companies, postal services, water and electricity companies and public transport companies. As far as such enterprises are concerned, the role of the government should be supporting rather than entrepreneurial. However, government enterprises generally are exposed to political pressure which is detrimental to the overall economic performance.
Privatization will not only provide an investment opportunity for the private sector, the efficiency and profitability of those enterprises will be improved and also the service quality may increase. Basically, privatization is the transfer of an enterprise (assets or shares) to the private sector or creating a public-private partnership between the government and the private sector. The government can use the proceeds for debt reduction, e.g. to redeem government bonds.
Privatization has always been surrounded by skepticism. Does market competition in the private sector indeed result in enhanced efficiency? What about the employment conditions? Do people have to pay more for services once an enterprise has been divested? As far as these and similar concerns are concerned, the government either in the privatization process or through legislation is able to create the necessary level of comfort. Whatever the downsides of a particular privatization might be, the government should keep this concept on its agenda. Overall, downsizing the government is in the general interest.
The mechanics of privatization are complex in terms of legalities, logistics, valuing the enterprise, restructuring the enterprise for privatization, organizing sale processes, financial and legal due diligence, etcetera. A privatization requires the application of a wide range of skills and expertise.
Karel Frielink
Attorney (Lawyer) / Partner
Just came across your blog. I like it. Keep up the good work. ChinaLawBlog.com