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Saudi Airline and the Privatisation - Dissertation Example

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Running Head: Saudi Airline and Privatisation Saudi Airline and Privatisation Table of Contents Introduction 3 Privatisation 3 Reasons for Privatisation 3 Case of Saudi Airlines 5 Research Question 7 Research Objectives 7 Literature Review 8 Processes of Privatisation 8 Ideology of Privatisation 9 Advantages of Privatisation 10 Case of Continental Airlines 11 Disadvantages of Privatisation 14 Criticism on Privatisation from Within (The Right and Conservative Economists) 14 Case of British Airways and British Railways 16 British Airways 16 British Railways 19 Privatisation in Saudi Arabia 20 Methodology 22 Research Philosophy 22 Data Sources 23 Findings a…
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Download file to see previous pages However, 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 place 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 outsourcing or contracting (Bortolotti, et al., 2004, pp. 330). Reasons for Privatisation As argued by Megginson & Netter (2001) that the government usually justifies privatisation with three reasons. First, privatisation generates revenue which could be used to reduce the fiscal deficits and pay 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 International 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, privatisation 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 theory 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 competitive 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 ensure effective and efficient resource allocation, which not only generates employment ...Download file to see next pagesRead More
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