Privatization is one of the economic policies of modern governments, be it large or small, democratic or authoritarian, capitalist or socialist. Privatization is a global phenomenon. The trend towards privatization can be traced back to the 1970’s and 1980’s.
Firstly, it was President Jimmy Carter who in the year 1976 said American Administration ‘lacked administrative skills’ for the performance of daily work, which shook entire public administration and changed its traditional performance. This led to the emergence of new approach in the discipline of Public Administration called ‘New Public Management’ (NPM) perspective. The successor of Jimmy Carter was Ronald Reagan, who was convinced that the administration must undergo changes to tackle new problems. America was facing huge budget deficits and inefficiency, which Reagan accused as the result of the misallocation and mismanagement of public funds.
The idea which promoted privatization was that government is not the solution to the problem, but rather it is the problem to the solution.
In England Margaret Thatcher, then prime minister, was faced with similar situations. The public spending was increasing, as productivity and efficiency of public bodies were in decline. This also added fuel to the growing idea of free markets, deregulation and privatization. The government which governed least, or the ‘rolling back of the state’, was the idea behind privatization.
What about communist and socialist states?
For a long time China was regarded as an ‘inward looking’ and isolationist country. During the revolution in 1949 chairman Mao was much inspired by the writings of Marx and Lenin which led to establishment of the communist state. However in the year 1979 Chinese leadership felt it must compete in international trade to help boost their economy. Today China is regarded as the world’s second largest economy, with growth rates around 10% per year.
With the fall of the Berlin wall in the year 1991 the Soviet Union disintegrated. This marked the end of the rivalry between communist Russia and Capitalist America, and was regarded as a triumph for democracy and capitalism. This made the whole world believe that democratic states are the best states and capitalism is the best economic policy. To perpetuate the idea of capitalism and democracy which favored privatization, international institutions such as IMF, World Bank and WTO promoted ‘Washington Consensus’ in the interest of the West.
It is also interesting to note that the so-called socialist state of Cuba, under the leadership of Raul Castro, talked in favor of privatization. Cuba planned to layoff half a million state workers stating that too many workers with low productivity burdens the budget.
The Indian case
Indhira Gandhi was the champion of Indian socialism during the 1960’s. The word ‘socialist’ was added into the Indian constitution to direct its policies towards socialism. The nationalization of 14 Indian banks and its coal industry came when socialism in India was at its peak. However India entered into a debt trap by the end of 1990’s because of excessive wasteful public expenditures and inefficiency in the public sector. Therefore India adopted the new economic policy Liberalization, Privatization and Globalization (LPG) in the year 1991 under the leadership of the then finance minister Manmohan Singh. Today India is regarded as one of the major emerging economies of the world with the growth rate of around 8% per year.
The Maldives
Privatization of the Maldivian economy has been a hot topic since 2008, with the arrival of the first popularly elected government under the leadership of Mohamed Nasheed. Since this government came into power one of its economic policies has been privatizing the economy. The sale of Male’ International Airport to Indian company GMR was one of the very first steps in this direction. As Maldives tries to expand its tourism sector the need for a modernized airport and efficient management arises to compete with its counterparts, such as neighboring Sri Lanka. The airport was not developing enough to compete and give decent service to the tourists. The airport remained as it was without a major improvement in infrastructure.
In the upcoming year the current government has decided to privatize 5 more companies. This includes STELCO, Maldives Post Limited, Island Aviation, Housing Development Corporation and Maldives In-Flight Catering. However the privatization of these 5 companies was rejected by the parliament, which stated that it violates Maldivian financial laws.
There were plenty of objections to privatization in England and the US during 1980’s, protests in India during the 1990’s and also in Maldives since 2009 against the idea of privatization. I acknowledge the protestors also have points to prove, such as the private sector‘s objective to maximize its profit at any cost and the widening of income disparities because of private sector. I shall talk about the process and defects of privatization in another occasion.
Therefore the idea of privatization is a global phenomenon and is happening in most countries in the world. It is happening because of inefficiency, delay, corruption, red tapism and nepotism in the public sector, in the interest of delivering results the people expect.
What comes to mind is a couplet written by English poet Alexander Pope. He wrote, “For forms of government let fools contest; whatever is best administered is best.” Therefore it is very clear that whether it be a democratic, authoritarian, socialist or communist government, at the end of the day if that government is not able to administer and live up to its promises, then that government will lose popularity.
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Dear writer,
When did we "SELL" airport to GMR? I thought it was a long term management contract?
Mr. Ahmed Mohamed you are writing all crap, Maldivian economist from Kandahar Madrasa, Katamula Muthalib made a statement that privatisation of public companies is not and bad for a country’s economy.
Saint Joseph's? My dear Maldivian Muslim brother.....I fear that by studying in a college such as that, you may deviate to the path of Jews, if that hasn't happened already?
Why didn't a smart person like you go to Medina, or Pakistan to learn about Islam or the Quran or Jihad? Inshallah I hope you come back to the path of Muslims, and leave the path of the Jews!
Ahmed Mohamed is a student of st. what? What is he reading there?
Hello Mr. Ahmed Mohamed. Have you just regurgitated some stuff from your text book, brother?
"The sale of Male’ International Airport to Indian company GMR"? since when did that happen? Get your facts right! This is news to the rest os us. I never knew it was "sold". Ok. So this is actually much worse than what we all suspected all along.
Hey brother, people are not against privatisation per se. Its the manner in which things are being done. We have absolutely no problem with privatisation. But handing over the most valuable assets of the state to companies that contribute to MDP and reeko moosa and ibrahim husen zakis's cronies at a fraction of the actual market value of these assets is not privatisation. This is outright robbery! Do you actually know how many Government companies (non-functional utility companies, health corporations, etc) has been formed just by pumping state funds to these places? All these non-functioning companies were being formed while at the same time the companies of actual value were being sold through under the table deals! These is not what privatisation is about, brother. MOYA NUGOVAA! Dont try to teach us privatisation. Where were you when Jimmy Carter was the president? Where were you when berlin wall came down? This is Jimmy Carter's father talking about privatisation. ok?
"The sale of Male’ International Airport to Indian company GMR was.."
Is the Male' Int'l airport really been SOLD? To my knowledge, and according to what GoM and MGR has said so far, I read and understand it was leased. Apart from this very sentence, your article seems a very academic and well researched one.
But by this single untrue statement all the rest of what you've written is questionable. So I guess who read your articles should make read double check all the rest you wrote. This is really a concern - to confuse the ppl with twisted facts and bluntly untrue facts.
Perhaps, one can conclude you as Gay-yoom himself writing under a bogus name and living up to his ways (i.e. tricking the ppl with twisted facts and lies.) Hypocritical devils in disguise - some as Muslim Mullas others as smooth speaking 'politicians'/'experts on any subject'.
LOL!
This is a googled essay that any fifth-grader could write.
The writer needs to learn the difference between corporatization and privatization as well.
Also indiscriminate privatization is the issue not privatization itself. The telecommunications sector of the Maldives has been privatized for ages. It was long before the famous 'popularly-elected' Nasheed came to power.
The terms of privatization are hard to handle for fifth-graders so I think we must let this shoddy piece of writing slide. No use commenting on nonsense.
yes Privatisation was done a lot in the 80s but now it has come back the full circle. You mentioned, Margret Thatcher and now her economic policies has destroyed most of the manufacturing industry in the UK.
British Rail, British Airways and British Airports Authority and British Gas were extremely successful organisations before they were privatised under Thatcher.
Where are they now? It is lucky that the train services get to run on time.
The Airports is now being owned by a Spanish Company and is in trouble and have to sell some of their other airport.
British Airways is no longer the top airline it once was and British Gas now depends on the Russians.
It is a bad policy to privatise national assets. If it is not run properly then measures should be taken to run these properly, not sell them to foreigners.
This is a pathetic article and minivan should have higher standards than to put this up!!!
You quoted Indira Gandhi as having been in power in India during the 1960s. This is an error. She was not in power at that time.
Your very first sentence signals that you do not understand the aim, purporse and the public policy objectives of why privatisation is pursed by Governments. Indeed, there is no straight jacket formula and each case depends on the situation. Although privatisation is sometimes pursued as a rightwing dogma, rarely Governments do it without a full economic impact assessment on all stakeholders. An EIA doesn't seem to have been conducted in the case of GMR deal - if so, Government could have used the EIA as a defence. Not commenting on the motive, GMR is a poorly negotiated deal and I'm sure even core MDP supporters will agree.
I hope that you are not an advisor of the Government - if so God save us.
a well researched article. we need more intellectual and less biased articles like this.
Dear Ahmed Mohamed, I'm extremely pleased to read your article. You have actually shown a way as to how privatization takes long and marred by protests. That is what depicted by our brothers in their comments. This is a natural phenomenon. Don't worry.
GOOD ARTICLE!
-Gaga
the writer has given us global picture of privatization. wat i found interesting ws privatization ws accompanied by protests and demonstrations.
Dear Mr. Mohamed Ahmed,
Most of the comments above are all very brutal. But that's really what you essay is all all about. This essay might stand a chance to get a 'D' grade in Grade 8 economics if the teacher has a soft spot for you.
He had copied the article from a school text book.
yes,Yes, Yes
absolutely many things only in Maldives.
1-Democracy withing the Democracy
2-Judisery with political motives
3-30 years dictator without custody
4-All Maldivans are economists all economists are not Maldivians
5-All Muslims are not Maldivians
6-All Maldivians are Muslims
7-All Islamic Scholars are politicians
8-All Politicians are not Islamic Scholars
10-All MDP MPs are not opposition they act like oppositions.
PRIVATIZATION all over the world.
1 Privatizations by country
1 Privatizations by country
1.1 Argentina
1.2 Australia
1.3 Bahrain
1.4 Brazil
1.5 Canada
1.6 Czechoslovakia
1.7 Egypt
1.8 Finland
1.9 France
1.10 Germany
1.11 Greece
1.12 Hong Kong
1.13 India
1.14 Iran
1.15 Iraq
1.16 Ireland
1.17 Israel
1.18 Italy
1.19 Jordan
1.20 Japan
1.21 Korea
1.22 Kuwait
1.23 Malaysia
1.24 Netherlands
1.25 New Zealand
1.26 Norway
1.27 Pakistan
1.28 Poland
1.29 Qatar
1.30 Romania
1.31 Russia
1.32 Saudi Arabia
1.33 Singapore
1.34 Spain
1.35 Sweden[6]
1.35.1 1980s
1.35.2 1990s
1.35.3 2000s
1.35.4 Planned privatisations
1.36 Turkey[13]
1.36.1 1980s
1.36.2 1990s
1.36.3 2000s
1.37 Ukraine
1.38 United Arab Emirates
1.39 United Kingdom
1.39.1 1970s
1.39.2 1980s
1.39.3 1990s
1.39.4 2000s
1.40 United States
@ asif
School textbooks do not contain nonsense, certainly not in developed countries - is this from a maldivain textbook?
who ever has written this article, is so unlucky.coz he has written abt privatization at a time when maldivians are frustrated abt it. otherwise this article wud be appealing specially to the uneducated MPs in our Majlis.....
@ Michael Fahmy. Indira Gandhi assumed to power in the year 1966....check ur facts
@romeo razzag . why are we politicizing everything...i myself finished O level in the year 2009 in Ahumadhiyya and i scored A grade in Economics. But honestly speaking i dont kw much abt privatization and how it has shaped in other countries...