Conclusions and Recommendations - Advisability of Adopting Privatisation

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Chapter 5 - CONCLUSIONS AND RECOMMENDATIONS

5.1INTRODUCTION

To make this study come full circle, it is important to highlight the conclusions that may be drawn from the main findings and some thematic patterns that have transpired through the analysis of the results obtained and elicited in the preceding chapter. These findings are linked specifically to the research objectives that were targeted, initially.

It is also judged fitting to follow up the discussions and conclusions reached (as presented in the next sub-sections of this chapter) with a few recommendations that are addressed to the primary stakeholders, namely policy makers, decision-makers and agents that are directly concerned with the implementation of privatisation processes.

5.2 DISCUSSIONS AND MAIN CONCLUSIONS

This subsection discusses the conclusions that may be drawn from a closer scrutiny of the main findings. These are presented along with references to the objectives, item by item, to facilitate interpretation of the themes that tend to transpire there from.

Thus, with regard to objective 1 which it must be recalled, was specifically concerned about gaining meaningful insights into privatisation as a process and its implications, with focused reference to the Mauritian business environment. It may safely be held that this objective was adequately met through a thorough identification and examination of the central issues as well as those closely attendant on it, as presented and discussed in chapter 2 (Literature Review) and further investigated through the research approaches adopted for the current study. Likewise, this dissertation revealed that different approaches to and types of types of privatisation process can be adopted by policy and decision-makers alike. It became evident that these varying privatisation modes expectedly possess varying attributes and delivery varying outcomes. The exploration of such implications show that Mauritian policy-makers are justified in adopting a case-to-case examination of the entity or enterprise destined to be privatised. It also became obvious that the format or structure were and continue to be pertinently guided by the drivers and barriers underpinning the privatisation attempt and goals. Given that the Mauritian experience was initially triggered by external but strong international financial institutions like the World bank and the IMF in view of correcting economic orientation for enhancing the raison-d’etre and the efficiency as well as performance levels of state-owned bodies and enterprises (mainly active in the service provision domain to public consumers and business/trade operators, alike) while raising significantly productivity, it may be held that the privatisation process that started in the 1980’s, picked up momentum in the 1990s and came to be refined at the turn of the new millennium were sharply dictated by economic concerns. However, as was quite clearly evident through the responses generated via the survey exercise implemented for this study, many a factor was guided or diluted by socio-political concerns, as may be expected with changing governments. It is thus, that it may be concluded that in Mauritius privatisation modes adopted for different state-owned and managed agencies were geared towards satisfying contextual motivations over time. Political, economic, social as well as technological factors were bound to intervene with varying degrees of influence in privatisation decisions and implementation exercises.

In so far as objective 2 (concerned with determining whether or not Mauritian privatised entities have been able to benefit – after some three years of operation under the new framework/structure, in terms of profitability, efficiency, employment, output and leverage, it may be concluded that on the whole the achievement or performance levels can be assessed as being between moderate to above average standards of success. From the vantage point of profitability, it has been found that the median on this count for post-privatisation is superior to that for the pre-privatisation period of operating business and delivering services. In short, privatisation has been found to bring in dividends that contribute to justify the additional efforts and costs deployed for enhanced rentability. It must be pointed out that, although profitability, in money terms, increased, the returns on investments were lower.

Moreover, looking at the issue from the pertinent perspective of efficiency, the results which in turn, led to the main findings in that respect tend to indicate that the median for efficiency during post-privatisation period is significantly higher than the efficiency median for pre-privatisation years. Again, privatisation has shown good potential for efficiency gains derived from privatisation – whichever formula may have been used. As a matter of fact, the rejection of the null hypothesis (refer back to chapter 4) clearly indicates that there can be a sizeable difference (not always seen in a very tangible manner) between the efficiency levels of privatised units or agencies and those of traditionally private and public entities. It could be expected that newly privatised bodies’ efficiency ranks higher than that of public service providers but inferior to that of intrinsically private operators in service delivery such as banks, insurance brokers and others, for instance.

Otherwise, viewed from the perspective of objective 3 which aimed at depicting the general view of employees of privatised organisations, these may be summarised as being overall at above average on the positive scale of perception. This tends to indicate (with the highest mean standing at 3.51 and lowest slightly below the 3 level at 2.92), that employee perceptions of privatisation ranges at favourable levels while considering duly that such perceptions were clearly mitigated or unfavourable in a few instances. However, this must not be construed that the respondents are not positively influenced in their attitudes and behaviours within a unit newly privatised, with ownership transferred from state to private or semi-private holders.

At this point and with particular reference to objective 4 which was aimed at identifying the potential benefits that can accrue from privatisation, it was evident that newly privatised companies are generally perceived as being more performing, more efficient and more profitable for all primary stakeholders, whether it happens to be that state, companies, or public consumers. From a purely managerial perspective of how the affairs of the privatised unit are shaped and led, again the picture looks to be more attractive when comparing the post-privatisation era. This is sufficient indication that on the whole privatisation enjoys a positive perception from different quarters while offering ample scope and opportunities for structured reform, business re-engineering, customer relations management, research and development. Under privatisation, the potential for innovation and incremental change becomes more than apparent.

The next point of final discussion regarding objective 5 which as a reminder was focused on highlighting the barriers inhibiting privatisation, it has been observed that these are much in alignment with aspects and factors that were reviewed in the literature. Notwithstanding, the plus points with which the findings may be credited and as earlier discussed, it was also perceived that in quite a few cases initially stated objectives mainly in terms of savings on costs are not always attained. In fact, when cost-saving measures are seen to be contrary to expectations, the benefits may be outdone. Other drawbacks or pitfalls indentified through the empirical search led to the conclusion that privatisation constrains access to information while causing some kind of problem or other to control, accountability and competition. In some ways then, the study also reveals that privatisation can self-defeat into initially stated goals when inefficiencies of diverse types creep in.

5.3RECOMMENDATIONS

The findings and conclusions elicited in the preceding section of this dissertation and in the preceding section of this chapter itself, lead to a few recommendations (which must be viewed as suggestions or guidelines more than anything else). Although it was hinted at through some empirical evidences as presented in chapter two of this project, Mauritian policy-makers and decision-makers appear to be convinced that privatisation is an essential strategy towards enhancing the efficiency, profitability, and performance levels from all points of view (commitment of management, involvement of employees and customer responsiveness, amongst others) of hitherto state-owned agencies that were perceived as being under-performing. These findings confirm the views of Anderson, Djankov, Pohl and Claessens (1997).

However, it is objectively felt that everything must be done to really work towards maximising the benefits, while countering the drawbacks and removing these barriers. It is imperative that one and all should be prepared to face the challenges of intensified efforts to privatise underperforming state-owned institutions towards promoting customer responsiveness and satisfaction, as a major concern. It is undeniable that privatisation has strong potential for increasing productivity of workers while freeing the company from burdensome bureaucratic procedures (characteristic of state or highly centralised). It is generally acknowledged that boards of directors – appointed by the government of the day, are generally composed of individuals (nominated in reward for allegiance or services rendered to the political party or parties at the helm of government). One does not need to resort to a crystal ball to predict that sometimes (perhaps more often than not) this underscores the performance of such BODs are decision-makers through lack of pertinent professionalism. The success stories of a couple of privatised companies are enough indication that, when professionals are appointed on the sheer merit of their academic or professional qualifications and the experience they have in the field of strategic management, privatisations are worthwhile. Effective and efficient BODs with directors and, in particular, a chairman that means business, are also essential. The experience of approaches adopted in such co-ordinated market economies like Denmark or Sweden where privatisation efforts are made to follow strict lines of professionalism should provide the Mauritian local policy and decision-makers with inspiration to move along similar lines. Also, when a privatised company cannot hire or fire recruits or provide the right kind of career development or motivational packages to their employees, then the very purpose of privatising inefficient state-owned institutions will be defeated. The practice of Ministerial interventions or rather interventions with recommendation letters or memos delivered to potential candidates for filling vacancies or even creating unwarranted posts in privatised companies must come to a halt. If in a few cases, a political nominee at the helm of a privatised company (under some form of government control through majority shareholding) has been found to be more than successful and beneficial for the company and its public consumers, it does not mean that this should be a rule. More than political allegiance it is loyalty to the enterprise along with principles of true professionalism that may be likely to really enhance the management and hence, performance of a privatised company in which management, staff members, and others involved look in the same direction on the strength of a shared vision and mission.

It is always a bad thing to be trapped between two currents of business practice. When a privatised company performs and delivers services that result from half of its functional process or approaches typical of public entities or institutions and the other half dictated by private sector practices, it means that leadership and roles are not distinctive. It is thus recommended that when the state shifts ownership from public to private holding that state interventionism is to be rid of. The regulatory framework to control the management of the affairs and the functions of a privatised company may be strengthened by ascertaining that it can operate as an authentic private concern. Responsibility, accountability, and most importantly, enhancement of productivity and profitability levels through increased efficiency must become key factors, as stated by World Bank (2006) and Perevalov et al (1996), for increased credibility and credit-worthiness of privatised companies.

5.4LIMITATIONS OF THE STUDY

Insufficient time and resources has proved to obstruct the proper data collection and interpretation of the findings, and has as well limited the depth of the study. It is relevant to note that this is an individual attempt at analysing a management problem within private companies, and therefore results which could have been obtained under perfect conditions might not be reflected through this research.

Unavailability or lack of cooperation from respondents to fill the questionnaire without bias, coupled with inability or unwillingness to give accurate responses leading to response error may have, to some degree, affected the results of the study.

Lack of time in order to strictly follow the sampling procedure may well prove hindering and affect negatively the smooth running of the research.

Nevertheless, having identified those limitations, steps were taken to counteract any difficulties that could crop up during the course of this dissertation.

5.5CONCLUSION

The study has significant implications for the question often asked by researchers on the advisability of adopting privatisation. A number of barriers will continue to hinder the process. However, this study, through its findings, indicates that there are a number of factors that are intrinsically connected to the whole issue. Also, it can be risky to extend the results and conclusions reached to wider areas as the main instrument for gathering data was through the survey approach. The views were those of a selected number of respondents - although judged to be representative of the whole target population. This calls probably for a further longitudinal research work that may be undertaken not only to triangulate the findings of the current enterprise but to enable further meaningful insights into diverse issues, factors and implications of privatisation.

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