Privatization on Service Sector
Preface
We know that the countries which are developed today are getting very strong in service sector day by day. Without having a very significant service sector it is impossible to retain the development of the economy of a country. Service sector is the accelerator of an economy. And Bangladesh is one of the least developed countries of the world with a huge number of different problems but most importantly with an emerging service sector. Really this is a great tonic for this underdeveloped country on the way of development. So to utilize this potential setting up of a lot of service organization is needed. But the service organization should not be public rather private. Because we all know about the poor service quality and negative profit of the public service organizations of Bangladesh. So the privatization of service sector is one of our desired initiatives. It is one of the leading aspects with a very bright potential to boost-up the economy of this third-world poor country.
Prepared by:
Md. Abdul Hai – 07882860
Essence of Privatization
Despite a significant degree of public ownership in health, education, communication, utilities and energy sectors in the pre-independence period, Bangladesh inherited basically a private sector dominated economy at the time of independence in 1971.
A set of three inter-related reasons are put forward as rationale for privatization in Bangladesh. These are:
• Improvement of the governments’ fiscal situation;
• Improvement in enterprise efficiency following privatization; and
• Mobilization of greater domestic as well as foreign investments for higher growth in the medium-term.
Privatization is the incidence or process of transferring ownership of a business enterprise, agency or public service from the public sector (the state or government) to the private sector (businesses that operate for a private profit) or to private non-profit organizations. The term is also used in a quite different sense, to mean government out-sourcing of services to private firms, e.g. functions like revenue collection, law enforcement, and prison management.
Prepared by:
Moriom Akter - 07882832

Privatization and Services

Privatization of service helps an organization to better care to their customers, enhance their flexibility and technical up gradation. Nowadays, we see different special organizations are privatized like- airlines, railway, telecommunication and network etc. To understand the interrelationship with privatization and service we can notify the following definition of the privatization.
Privatization is the process, policies and ideas of reconstituting the institutions in a contemporary private position from the public form which helps the institution to keep apart it from the hand in policy and judgments of the political parties or the existing governments to ensure the qualified services to the people and to meet the highest performance and objectives. This actually takes the maturity in case of the service organization to make its positive outlook for the nations. (By P. Berger & R. Neuhaus).
So by analyzing the above definition we can come to the following diagram to make out the interrelation of the privatization and service-

Qualified Services

Privatization

Maturity of the service

Fig: Relationship between Privatization and Service How the service and privatization are interrelated. Some of the narrative discussions are given below with sequential steps:

1. Qualified service and privatization:
With the revolution of privatization the first of the 20th century, the nations see the higher performance in the service. Now a day it is regarded that the word of privatization deserve for the service, though it is a fuzzy word in case of the service analysis. Because here consumers are the king of the markets and the profits or the losses depend on the higher consumptions level. And higher level of consumptions depends on the providing the all type of service gaps which reserve more only the private firms and institutions rather then the public organizations.
Example: As an ideal we can refers the Rupali Bank in Bangladesh. When the Rupali bank was led with the formulation of the government it face the losses almost all the year and the government have to recovery the bank from the government fund. But after the running under the rules and regulations of the privatization it position has turn into the positively. And it has become the gainer. This is only when they have able to provide the higher qualified of services by the employees of the banks to their target customers. Like as we can refer many examples which will be the ideal for the privatization.

2. Maturity of services and the privatization:
Privatization has brought the maturity of the services. Here has to know what is the maturity of the services? Maturity of the services means the best position of the services. There are many organizations in the world which bring the service maturity to the beyond of the privatization. Here privatization compel the employees to provide the best level of services what says its norms and formalities to the applying the organization.
Example: As the example we can refer to the I TOP MAN Pvt. and the Silva Hips Pub. L. is the two specialized company of the London. The I Top Man run under the rules of the privatization and Silva Hips run under the political judgments. With providing the maturity of the service the I Top Man has made the best position in the European zone rather than the Silva hips.

3. Providing performance gap and the privatization:
Performance gap is the related topic of the service provider gap of the in service. But in case of the privatization one of the main ordinances of the privatization is providing the higher performance for the customers and clients. The most essence part in services is performances which relied to the specters of the privatization. To achieve the objectives of the organizations and become the leading position of any nation or the whole nation there should have the consistency with the vast acquired prospects for the services and the privatization. So the employees of the organization or any institutions should maintain the interrelated ruled of the privatization because it helps to bring the total performance for the firms and its related issues.
Prepared by:
Saidul Khan – 07882812, Anisur Rahman - 07882869

Ultimate Scenario of Privatization in Service Sector in Bangladesh

Privatization in Bangladesh:
Bangladesh is trying to cope with privatization over two decades. This policy has been influence by number of economic and extra economic components. Privatization studies regarding Bangladesh are very few until now. Bangladesh Privatization Board describes (2006) providing enormous incentives for accelerating private investment the Revised Investment Policy designed in 1975 for putting much emphasis in the development of private sector. They also analyze setting up Disinvestment Board and a total of 255 service organizations were privatized in between 1975 to 1981 and about 115 of these, were divested. The NIP (New Industrial Policy) of 1982 indicates a major move towards privatization where total of 222 service sector got privatized under the NIP’ 1982.

Popular support:
A decade ago, Bangladesh has about 90% in the public sector today is only about 40%. It means the popularity of Bangladesh service sector of being privatized. Now this country also thinks about privatizing in telecommunication sector. It is very difficult of a small country to change from one economic system to another economic system. Bangladesh is only one country in third world which has successfully switched from one economic spectrum to other.

Bangladesh's current economic policy framework is a liberal one. We provide a package of incentives for domestic and foreign private investors which are more favorable compared to other nations of the region. We now have recently established an Investment Board' creating a one-step process to help facilitate investment in the shortest possible time. Our industrial sector is now completely open, except for national security-related industries. No longer are we building industries in the public sector. Those public sectors which the private sector has shown no interest in buying, such as certain shipyards, have been reformed. Bangladesh provides a major investment opportunity for countries like Taiwan, Singapore, and Japan. In fact, we have had good responses from Japan and the four Asian Tigers. As for the U.S. private sector, investment has been negligible. One of our aims at present is to attract more U.S. private investment. Last year, we hosted an Overseas Private Investment Corporation (OPIC) mission from the U.S. This was the first time a mission of U.S. investors come to Bangladesh to explore the possibility of investment in the private sector.

Extent and pace of privatization:
While Bangladesh is considered a fore-runner in carrying out privatization, there seems to be a common belief that the overall achievement has not been all that impressive. Lack of enough political commitment and determination, absence of sufficient legal framework, limited institutional capacity, mistrust among the workers and above all, political discord between the party-in-power and the opposition political parties are generally identified as important factors limiting the progress of privatization in Bangladesh. Moreover, opposition to the privatization of the SOEs is not limited only to the above factors, it is also orchestrated further by the country’s left-leaning academics, political leaders and opinion moulders.

Different Sectors of Privatization:
While privatization in Bangladesh began since mid-1970s and the process has evolved through many ups and downs till then, it is difficult to arrive at any conclusive judgement on the true magnitude of privatization of SOEs taking place because of lack of hard statistics on the one hand and the controversies surrounding the mode and methods of privatization of the units involved on the other hand. For example, a study conducted by C.A.F. Dowlah (1997) for World Bank (referred to as World Bank Study, 1997, henceforth) points out that a total of 1089 enterprises consisting of industrial units, commercial businesses and banks etc were privatized in Bangladesh between 1972 and 1996. The latest study conducted by ILO (1999) estimates a total 1083 SOEs being privatized during the same period of which 610 were industrial enterprises accounting for 56 per cent of the total denationalized units. The distribution of the 610 industrial enterprises by sectors of industry and over different periods of time between 1972 and 1996 are shown in Appendix Table A-2. Of the total service enterprises privatized, education, health were the dominant sub-sectors, followed by telecommunication, amusement of park etc. What is, however, interesting that the overwhelming majority (over 70 per cent) of the units privatized between 1972 and 1981 were small-sale enterprises both in terms of investment and employment and were returned to their original owners. Subsequently, a Privatization Board and a Privatization Policy Statement were put in place to streamline and expedite the lagging privatization process. The progress seems to have slowed down further as only four industrial enterprises have been privatized and transferred to private ownership between June 1996 and to-date. Additionally, LOI has been issued for eight enterprises after final approval of the Cabinet Sub-Committee for finance and economic affairs though their eventual transfer to the buyers is yet to take place. As noted before, the transfer process is often lengthy and subject to uncertainty due to legal complications, heavy loan liabilities, non-transparent bureaucratic procedures and opposition by the trade unions.

Donors’ concern:
While the donors are strongly supportive of the privatization program in Bangladesh, they have expressed deep concern at the present slow pace of progress of the privatization process. The author’s discussion with the concerned World Bank and ADB officials revealed that they are strongly in favor of accelerating the process which is at the moment considered to be virtually stalled. Limited legal authority of PB and overall weak institutional framework, feeling of mistrust among the concerned parties, sale of financially and economically unviable SOEs, and bureaucratic procedures are identified as important inhibiting factors.1 Thus they suggest a more powerful and effective PB having a proper legal status, setting a phased time table for achieving the privatization targets, careful revaluation of assets of the SOEs on the basis of market prices as opposed to unrealistic book value of assets and design of an appropriate and comprehensive safety net program for the workers as plausible counter measures towards expediting the privatization process.

Recently Taken Steps:
However, a few more steps need to be undertaken to put in place an effective institutional arrangement for privatization. For example, nothing has been mentioned in the privatization policy about the role and status of the sector corporations which manage the SOEs on behalf of their respective Ministries. While the sector corporations will lose their relevance after completion of the process of privatization of the SOEs, it may be useful to take a decision now as to when they will be abolished. Again, side by side with the PB, Bangladesh Railway, Biman Bangladesh Airlines etc. are known to have their own privatization process. Recently, the Ministry of Jute has floated a tender for sale of some of its own mills offering terms and conditions different from those of the PB. But expediency demands that there should be onlyone operational arm of the Government for executing its privatization program.

Current operational status and economic performance of the privatized units:
One of the major objectives of privatization is to improve productive efficiency of the privatized firms. In Bangladesh context, this assumes crucial significance as the SOEs suffer from generally low levels of labor as well as capital productivity, huge revenue losses and hence lack of re-investable surplus for further investments and long-term growth. However, it is by no means established that mere change of ownership from public to private sector will necessarily lead to improvements in productivity, especially when other policies and institutions remain unchanged. Privatization to be gainful has to be accompanied by better management of the firm’s capital and human resources under innovative entrepreneurs who are willing and able to transform the previously unprofitable enterprises into profitable ones by injecting additional investments, introducing new and improved technology and efficient corporate governance. While sound management and improved corporate performance requires sound and disciplined financial institutions, favorable legal practices and standards etc., Bangladesh’s overall production environment is characterized by volatile political situation, inadequate infrastructure, frequent power failures, labor unrest, rampant corruption, natural disasters etc. which seriously affect investors’ confidence and industrial performance. This lack of a conducive investment and production environment does not guarantee improved economic performance of the privatized units, and this perhaps explains why privatization has not yet produced expected results in terms of higher investments and growth. Any assessment of the post-privatization performance has to be judged against this reality. A World Bank (1993) Study of the performance of the privatized units divested during 1980s reports that nearly 50 percent of the enterprises (e.g. 245 out of 497 small industrial enterprises excluding large jute and cotton textile mills) have been closed down. A depleted asset base, high debt liabilities and inefficient management are noted as important factors explaining poor performance of the divested units.

The need for a dialogue:
As noted already, since privatization involves political decision, privatization policy needs clear political mandate, reflecting popular support of both the policy makers and the general people. In particular, support for such a mandate needs to be obtained from the ruling party and the main opposition party so that there is no uncertainty and vacillations in the privatization process. An opportunity in this regard remains to be availed through putting the forthcoming Privatization Bill to the National Parliament for parliamentary debate and public dialogue.

Unfortunately, no serious attempt seems to have been made so far by any Government in the fact that some privatized enterprises in Bangladesh have done well while others have not should come as no surprise to those who have monitored post-privatization performance elsewhere. Variations in performance are common, both across and within countries. In Bangladesh too, we need to focus more attention on post-privatization problems faced by enterprises.
Prepared by:
Lutfur Nahar - 07882830

Privatization: Service VS Manufacturing

Service and manufacturing sector both are the most important for the country. The country that has strong manufacturing industry has a strong economy background where strong service sectors also help the country to improve its economic condition. As both sectors play a very important role in the country’s economy then both sectors need to be privatized. But as now service sector is growing very rapidly then it’s more important to privatization than manufacturing sector. Now we see the importance of the service sector in comparison with privatization in manufacturing sector. 1) Manufacturing sector needs huge investment. So sometimes it is difficult to set a manufacturing industry by private investment. In case of service sector it needs less investment than the manufacturing sector. 2) Privatization of service sector runs its service with better quality and in case of manufacturing industry also can give us better product .But it also rise the production cost of that product. 3) Government emphasizes on some sector to be privatized because they do not want to manage that sector like hotel. Here in Bangladesh all 5 star hotels are run by the private organization. But in case of manufacturing sector government want to invest directly for providing low cost product for the people. 4) If manufacturing sector runs the government then they collect their raw materials from the foreign country without paying tax and other import costs. They cannot get those facilities in case of privatization. But private service sector can nine more sophisticated technologies to serves its customers.
Prepared by:
Md. Abul Hasnat – 07882813, Anisur Rahman – 07882869

Comparison between Public and Private Service Sector

The service between the public and private sector is far more different with each other. In almost all of the cases the service of private organizations is much better than the service of public organizations. A lot of reasons are there due to those reasons the service is poor in the public organizations and standard one in the private organization. These reasons and other differences between public and private organization is shortly described following:

Compensation of the employees:
Very traditionally the compensation of the public organization’s employee is less than the employee of private organization. Due to this poor compensation the employee of the public organization doesn’t get any motivation to serve the level best of his capacity. On the other hand the compensation and other rewards encourage the employee of the private organization to work hard and to put the best effort.

Productivity differences:
The employees of the private organization are very highly productive due to the strong accountability process of the organization. But in case of public organization the accountability process is very weak. And the ultimate result of this weak system is the less productivity. One employee of private organization is serving four customers where the employee of public is serving two or three.

Working hour differences:
The working hour term for both the public and private organization employee is almost same but the employees of the public organization don’t follow the terms. They violate the working hour condition very frequently. They enter in the office late and get out of here very early before the end of the office time period.

Working environment differences:
The environment of a private organization is much more suitable and comfortable to work for the employees of the organization. And the customers also feel better to be in the private organization rather than the public organization.

The way of behavior with the customer:
The employees of the private organization behave in a very standard way, which is very friendly and helpful, with the customers. But the scenario is very different in the public organizations. They don’t care about the employee problems. They provide service in the way they want to rather to concentrate on the customer satisfaction.

Job security:
The notion that public employees are significantly undercompensated begs the question: if they are so underpaid, why would they agree to take government jobs when they could earn more by performing similar jobs in the private sector? Some might cling to the romantic idea of "public service," but public-sector employees are every bit as self-interested as private-sector workers, so this answer is wholly unsatisfying. They actually come in the public sector for its better job security rather to serve the public. But the job security is a bit lower than the public employees.

Pension and Retiree Health-Care Benefits Differences:
The public employee gets the pension and healthcare benefit after retirement even. But the compensation of the private organization gets stopped from the day they get retired.

The use of technology:
The private organizations are greatly ahead from the public organization in case of using modern technology. The modern technology helps the private organization to serve a better service than the public organization.

The rate of corruption:
Bangladesh is such a country where the corruption is a part of its culture. And it is very intense in the public organization. Which deprive the customer from his desired legal service. But the corruption is not so much intense in the private organization.

The same employee in both private and public:
Some employees of public organization work for both public and private, specially the employees of universities and hospitals work for the private also after the working hour of public. When they are working for the private organization they are very careful about their quality of service. But the same employee, when working for public is carefree about what he is serving for the general public.
Prepared by:
Mehedi Hasan – 07882794, Md. Abdul Hai – 07882860

Benefits of Privatization

There are many benefits of privatization in service sector and perhaps for this reason most of the countries are moving toward the privatization of service sector. There are many parties who are directly and indirectly greatly benefited for privatizing service sector. Among those parties the organization which have been privatized and the customers of that organization get enormous benefits. So the benefits can be shown both from organizational and customer perspectives.

Organizational Perspective
Because of being private an organization gets many facilities and benefits itself. The advantages private organizations enjoy discussed below:

1. Proper Accountability
The private organizations can be greatly benefited because there is a culture of proper accountability within the firms which is very much absent in the public organizations. If we turn our attention to attitudes of private and public firms, the differences of accountability will be clear. Because of the bureaucracy in the public organization there is a broken culture of accountability to the seniors. For example, it will be wise to mention the culture of accountability between Duch Bangla Bank Ltd and Sonali Bank Limited.

2. Better management
As there is no hand of government to interfere the managerial tasks of any private service firm so the management of the firm can make any decision which will help them achieve the goal. So, it is easily said that private firms can show better management than government organization. For example, if any patient goes to both Dhaka Medical Hospital and Salauddin Specialized Hospital (Pvt) Ltd then he will understand the differences in the management existed between them.

3. Earning more profits
It is the profitability of government and private organization which is very interesting thing in our country. An organization is facing very continuous loss in each financial year. But the same organization is earning substantial profit when it is privatized. For example, we can mention the incident in our energy industry that we are talking about Palli Bidyt Samity which is earning more profits now but in the past they showed loss in their balance sheet each year. So we can say that private firms earn more profits than government organization.

4. Discipline and punctuality
In our country private firms indicate regularity, punctuality, and discipline in the offices. The employees who are employed in a private firm can not enter in the office as they like. They are to strictly follow a routine, decorum of the office, dress code, chain of command. But these things are really absent in the government firms. For example, a government employee is coming home before 4 pm, even sometimes they are not going office at all. There are many hospitals in the rural area where the doctors go to the hospitals rare though the government is always providing extra incentives with regular salary for the doctors.

5. Growth in production
As the managing quality, regularity in production process, punctuality and accountability are better in the service firms which are privatized so there must be more production in the private firms than the government organization. However, for this reason we see an inverse scenario before and after privatization of any organization. 6. Increase of Flexibility:
Privatization gives state officials greater flexibility to meet program needs. Officials can replace the private firm if it isn't meeting contract standards, cut back on service, add to service during peak periods, or downsize as needed.

7. Competitive advantage
Growth in production, proper management system, and better service quality are the fuels of competitive advantage. When these things are present in any firms they can compete with others. But it is a matter of great concern that there is no service sector without public universities who are competing with private organizations in our country.

8. Generation of new sources of capital investments:
Privatization increase allocation and productivity, efficiency, use of new technology, and management skills and creation of employment opportunities through higher growth etc.. Thus it creates attraction for national as well as foreign investments.

9. Strong human resource
We know that recruiting system in the private sector is very strong. In private organization people enter with real and actual knowledge. These people have expertise in the working field in which they are employed to work. But we see that many public organizations are giving chance for working to lower knowledgeable people because these candidates have huge political power. So it can be said that the human resource in private sector stronger than that of public sector.

10. Transparent selection process
The employee selection process is quite transparent in the case of private organization in our country. In most of the cases the government cannot interfere in the selection process in private organizations. The authority can select suitable, qualified, energetic, and honest employees in their firms. 11. Organizational development
The organizations who are earning more profit each year can make infrastructural development. We can easily see and compare the infrastructure of private organizations and public organization. Organizational development occurs more in private firms because there are specific owners of private firms. On the other hand, government organizations face loss every year, so there should not be any question of developing.

Customer perspective:
Customers are the main beneficiaries for the privatization of service sector. The benefits and opportunities customers receive from the private service organization are provided below.

1. Better service
Quality service is a very common requirement to the private firms. Private firms always want to compete and earn more profits by building profitable relationship with their customers. So, customers get desired service from these organizations. For example, if we compare the service of Dhaka Medical Hospital and Square Hospital. The result is known to all that is Square Hospital proves better service than Dhaka Medical Hospital.

2. Proper environment
Environment is a very sensitive thing in case of receiving service because customers present themselves physically in service organizations in the most of cases. So, private firms always try to ensure an interesting and proper environment which is very much uncommon in the government organization. For example, if we again compare the environment between Dhaka Medical Hospital and Squire Hospital we will get appropriate differences in environment.

3. Customized service
Many a customer wants to get service as wish. So, private organizations try to offer services to make the customer satisfy. But it is totally different in the public firms because government-employees want to stay in relax always without doing their duty. They provide always traditional services to the customers. For example, Sonali Bank Ltd is now providing only traditional services but Duch Bangla Bank is offering modern services to its customers.

4. Relationship based transaction
Now a days many organizations are developing relationship based transaction by which customers are being benefited. Marketers always want to offer better service for building strong profitable relationship the customers. And for this reason customers are receiving better service and keeping themselves in safe by making relationship which is impossible in case of public firms.

5. Regularity in Service (courier and post office)
Regularity is a very much important in some services such as parcel, letter and treatment. But public organizations rare maintain regularity in providing services. For instance, Post Offices of our country do not maintain regularity in delivering parcels and letters whereas various courier agencies are regularly delivering all necessary documents to the doors of clients.

6. Time saving
Time is money. It is very popular word in the world of communication. As customers if we want to get services we should contact with the private organizations of that field of service. For instance, to reach one place to another we should go by Shohag or Hanif Paribahan rather than BRTC bus. We should use Sundarban Courier rather than Post Office. Customers also open account in Dhaka Bank rather than in Sonali Bank to save time.

7. Favorable attitude of employees
The attitudes of employees are very much favorable in private organization. The employees are very much cordial and helpful. But it is unusual in the government organizations. More or less all of us have experience from government organizations whether it is bank, transportation, hospital, or education. For this reason people are moving toward private firms. 8. Brand value and social status
Brand is another important thing which is the indicator of social status. People who are receiving services from private organizations think that they are in mental satisfaction. Sometimes they go to these firms for brand. A simple example will help to be clear about this argument. There are two men one with the account in Standard Chartered Bank and another account in Rupali Bank. Certainly the man who has account in Standard Chartered Bank will feel prestigious.
Prepared by:
Moriom Akter – 07882832, Md. Bellal Hossain – 07882833

Challenges Exists in Privatization

There are now a number of growing literatures on the subject that address several key questions:
– How have enterprises performed after privatization?
– Has efficiency increased?
– Has production grown up?
– What has happened to the workers?
The findings are mixed, that means while some enterprises are found to have done well, others have not. It is thus no surprise that different people have got different ideas in these areas. Some see the specter of de-nationalization, in fact, led some enterprises to the verge of collapse after privatization. However, others, noting that the closure of the intrinsically inefficient enterprises actually benefits society by stopping the wastage of valuable resources, see this as a success of privatization. Some people raise the issue of the poor loan repayment performance of some privatized enterprises and conclude that privatization is premature. Another group of observers note that the banks whose loans are defaulted are largely state-owned, and thus they argue for more privatization, encompassing both the real and the financial sectors. Some even look at the poor tax payment record of some privatized enterprises and question the rationale for privatization. Analysts also see a weak tax administration as the root problem and argue for greater privatization. Evidences from middle and high income market economies indicate that the results of privatization are generally positive; but such gains were immediately apparent in a number of countries, particularly in the erstwhile USSR republics and in a number of other low-income countries. Problems faced by enterprises after privatization, and their spill-over effects on the rest of the economy appeared as a matter of severe concerns and so the debate has also been associated with the treatment of the post privatization problems.

In Bangladesh, we need to focus more attention on the post privatization problems faced by enterprises. Indeed, as many problems are common to all privatized or non-privatized enterprises, it is important that we examine the issue to improve performances of the entire private sector. State-owned enterprises are usually slow at bringing about necessary changes in their operation; indeed this is a major argument for privatization. As a result, they are often saddled with many problems mentioned above, such as excess workers, absolute products, improper financial structures and lethargic marketing departments. For such enterprises, mere ownership changes may not mean much if it doesn’t lead to the required restructuring and overhauling.

Enterprises facing competition may survive without improving efficiency if someone is bailing them out. In Bulgaria, for example, trade liberalization in the recent past has intensified the competition. Empirical studies do not document any significant impact of competition on the performance of privatized enterprises. Because while the Bulgarian government liberalized trade, it continued to provide subsidy to privatized firms and tolerated tax arrears and defaults on loan repayments to state-owned banks. Sometimes the problems are cultural, arising from deeply-ingrained attitudes and practices. This has been a pervasive problem in the ex-socialist economies.
Unpredictable and poorly administered government policies also create problems. High taxes, frequently changing tax rates, arbitrary interpretations of tax rules and other harassment by tax authorities usually raise the cost of doing business and discourage restructuring. The lack of legal and economic information, including market studies and company diagnostics could also be a problem. It has been found that in spite of making promises, no regime in Bangladesh has come out with a clearly stated privatization policy which would both spell out its underlying logic and provide a coherent set of guidelines to define its direction. Raihan’s study suggests that the program of disinvestment of SOEs in Bangladesh has not been driven by any pragmatic policy. A large number of profitable SOEs have been disinvested during last years which clearly challenge the ‘inefficiency’ argument for disinvestment of SOEs. Some empirical studies have already indicated that a larger proportion of SOEs, following disinvestment, closed down or became inoperative under their private owners so that many profitable SOEs lost their profitability status after disinvestment.

So far the above 13 dominant factors in the problem of privatization is concerned, the situation of those factors after the post-privatization scenario can be described as follows:

1. Lack of fixed capital: In post-privatization scenario, 59% (97% increment comparing to the pre-privatization scenario) respondents voted for this as a dominant problem for the privatized firms.

2. Lack of working capital: 74% respondents supported for this factor as a dominant factor in privatization problem which indicates 23% increment from the pre-privatization scenario.

3. Unfavorable trade union activities and labor unrest: In post privatization scenario, 82% respondents voted for this as not a problem at all whereas in pre-privatization scenario 88% voted it as a dominant problem.

4. Working environment including job security, pay scale and industrial relations: 75% respondents voted for it as a dominant factor in the post-privatization scenario whereas in pre-privatization scenario the vote was only 39% which indicates 93% increment in the post-privatization scenario.

5. Lack of proper regulatory guidelines: Almost 49% respondents voted it as a dominant factor in privatization problem whereas in pre-privatization scenario the vote was 50% which indicates almost an indifferent situation regardless the pre-privatization & post privation scenario.

6. Problems in accounting, auditing and controlling system: 50% respondents (16% increment comparing to pre-privatization scenario) voted for it as a dominant factor in the privatization problem.

7. Corruption in management and poor management practices: In the post-privatization scenario, a dominant factor of pre-privatization scenario turned into a no more a dominant factor of privatization problem according to 73% respondents of the study.

8. Lack of professional people in decision making process: This factor turned into no more dominant factor in privatization problem at all according to 54% respondents after getting privatized whereas in pre-privatization scenario 60% respondents voted it as a dominant factor.
9. Quality of products and services: In post-privatization scenario this factor has remained not a major problem at all according to 52% respondents (1% increment comparing to pre-privatization scenario).

10. Marketing and distribution of products and services: In post privatization scenario, this factor has turned into not a problem at all according to 64% respondents whereas in pre-privatization scenario 52% respondents voted it as a major problem. So it can be said that privatization improved the marketing and distribution procedures a lot.

11. Impact of inflation, interest rate and exchange rate: In post privatization scenario, lesser respondents (50%) voted it as a problematic factor than the pre-privatization scenario (13% decrement is noticeable and significant also).

12. Lack of entrepreneurial capabilities: In post-privatization scenario, more respondents (63% in total, 5% higher than the pre privatization scenario) voted it as not a dominant factor in the problem of privatization. It indicates that privatization encouraged the entrepreneurs a lot to take initiatives.

13. Underground economic activities like smuggling goods and services: After privatization underground economic activities decreased a lot according to our survey result because more respondents (73%) voted it as not a dominant factor in privatization problem which is 12% higher than the pre-privatization scenario.

If we think in general, privatization of service sector create more opportunities to more employment and get more available services by private service organizations. But it has faces several challenges. These are shortly described below-

1. Declining quality of service:
Due to more private service organizations are entering in the market, the service quality is decline day-by-day. Because, now some private service organizations are give their focus only on their monetary benefit (e.g. several private Universities increase their tuition fees without improving their service quality).

2. More competitive market:
Now the market of service is fully loaded by several private service organizations. For that reason, the service organizations face more competition in the market (e.g. The market of cellular phone companies).

3. Difficulties of small private service organization:
From the beginning of privatization of service sector, some huge service organizations enter in the market and capture almost whole service market. For this reason, new small service organizations have a little bit of chance to enter into the market and compete with the giants (e.g. because the Grameen phone, Airtel, Banglalink capture the whole market of cellular phone companies, the entrance of new organization might be impossible).

4. Decreasing attractiveness of public service organization:
For the reason of increasing amount of private service organization who uses high technology. The attractiveness of public service organization is decreasing day by day(e.g. due to the high quality performance, the popularity of Square Hospital is much higher than the public one such as Dhaka Medical Hospital, BSMMH or P.G. Hospital etc.).

5. High Amount of service change:
Due to compete with the increasing private service organization, every private service organization charge a huge amount for their provided services (e.g. the tution fees of North-South University is much more higher than the public Universities like D.U, JnU, J.U. etc.).

6. Probability of increasing illegal organization and branches of private service organization:
Now a day some organizations are found which has not legal documents or permission of establishing such level of organization. Some organizations are found which are trying to open their illegal branch on several district of our country (e.g. Darul Ihsan University of Bangladesh has opened several illegal branches over through the country, which are now banned by the Government of Bangladesh.)
Prepared by:
Md. Saidul Islam – 07882792, Sheikh Md. Erfan – 07882852

Recommendations

Despite above problems, there are a number of potential sectors for privatization in Bangladesh some of which are mentioned below:

Power Sector
In view of the gradual widening of demand-supply gap, the government opened up investment in power generation, transmission and distribution to the private sector. Significant private foreign investment was envisaged for power generation. It needs to be mentioned that Power Development Board (PDB) signed initial agreements for setting up Barge-Mounted Power Plants with the following international companies’. a) Smith Co-generation International- 100W b) New England Power Company-100W c) Wartsila Power Development Ltd-100W d) Westmont Offshore – 100 MW

Natural Gas and Oil Exploration
National Petroleum Policy which came into force from July 1993 had already attracted foreign investment in oil and gas exploration and development. Five international oil companies signed production sharing contracts for exploration and development of hydrocarbon. The five companies are: a) Occidental Exploration of Bangladesh Ltd. b) Cairn Energy PLC and Holland Sea Search Bangladesh c) Redwood Oakland d) United Meridian International Corporation (UMIC)

Tele Communication
Telecom services used to be provided exclusively by Bangladesh Telephone and Telegraph Board (BTTB)-a government functionary. The recent revolution in information technology has opened up a new era for private investment in the telecom sector. In the meantime, the following two private companies are operating in rural telecom sector: a) Bangladesh Rural Tele Communication Authority b) Sheba

* For mobile telephone, the following private companies have been allowed to operate: a) Pacific Bangladesh Telephone Ltd b) Grameen Telephone c) Sheba d) Telecom Malaysia International Ltd. e) Warid Telecom f) Aktel/Robi

Transport Sector
Some studies conducted in the recent past on sectoral reform identified suitable privatization prospects in both the Road and Highways and in Inland Water Transport sectors. Contracting out the present operations and maintenance functions of these organizations is an immediate possibility. Besides private shipping liners and vessel services are in full operation in the country, with no restrictions whatsoever.

Port and Container Handing
There are quite bright prospects of private sector participation in improving port services in Mongla and Chittagong and in handling container services in the ports and other areas. Reforms are made continuously and may move to effective performances once the appropriate strategies are adopted.

Aviation and Tourism
Serious reforms have taken place in the civil aviation sector by allowing operation of private sector airlines in the domestic services. Tourism sector is fully open for the private sector to operate. Aviation services that were domestically offered have now crossed the boundary of the country. For example, GMG airlines are now providing overseas services also.

Banking and Insurance
The government undertook financial sector reform programs in the nineties. Private Banks and insurance companies with a few exceptions were functioning creditably. The Uttara, Pubali and Rupali Banks which were formally owned by the Government were later on proposed to be privatized. 49% shares of Shadaran Bima Corporation (General Insurance) were contemplated to be off loaded in the local stock markets.
The problems inherent in policy formulation of privatization and its implementation strategies have been clearly spelled out. One thing which is to be mentioned here is that mere understanding the pros and cons of the issues would not provide us much benefits. We need to avoid debating whether privatized enterprises have done well or not. In the current climate, even profit yielding SOEs are being threatened with privatization. There is a little incentive for those units that are still under public ownership to improve their performance. Since the privatization process may be more protracted than was once contemplated, a policy of indiscriminate privatization could thus not only lead to mounting claims on the exchequer but would accentuate the disincentives for any prospective buyers.

In order to make the privatization efforts a success, an indigenously designed pragmatic policy needs to be undertaken. Any policy towards privatization should be based on the intention of improving our economic sectors rather than implementing the ideologically-driven agenda. Moreover, the policy prescriptions of external sources including donor agencies, pressure groups and political lobbyists should be handled with great care and caution. The prospective sectors for privatization identified on the basis of reality must be given appropriate attention. In this context, the cooperation between the government and non-government organizations is of utmost importance.
There can be some other recommendations as well: 1. The government of our country should take necessary steps to maintain a service standard which should be imposing mandatorily for the all service organization. 2. The market competitiveness should be growing up in cooperatively and the service organizations should compete with each other by providing high quality performance. 3. The government of our country should provide sufficient facilities to the public service organizations to compete with the advanced private service organizations. 4. Private Service organizations have to minimize their service charge by which they can provide cheap services to the several classes of people. 5. Illegal branches and offices of some private organization should keep into lock. 6. Big and successful private organizations have to encourage small or new service organizations to enter into the market and provide their unique services to the customers.
Prepared by:
Md. Saidul Islam – 07882792, Sheikh Md. Erfan – 07882852

Conclusion

Currently service sector is the key player of Bangladesh economy, it is contributing the best part of our GDP and the amount of contribution is in an increasing trend. And this sector is mainly influenced by the private sector or more specifically privatization. Most of the service organizations who are the prime contributor in this sector are the private organization. Providing a better service and to earn a better profit is easier by the privatization of service organization rather by the public service organization. So the initiative of privatization is a very effective initiative and very suitable one for the Bangladeshi service sector. And we hope by overcoming the obstacles and challenges of privatization the service sector will contribute very significantly in the economy of this country and strengthen the economic position of Bangladesh in the arena of global market.
From the above discussion we are informed how much interrelated with service sector and it’s prosperity with the privatization and it’s mandatory rules and regulations that any organizations can strictly follow for getting long term opportunities, performance and reputations.
Prepared by:
Mehedi Hasan – 07882794

References

i. http://en.wikipedia.org/wiki/Privatization ii. http://www.mackinac.org/7294 iii. http://www.guesspapers.net/2884/advantages-of-privatization/ iv. Privatization in Bangladesh: Some Critical Questions”, available at, www.unpan1.un.org, v. Raihan , Selim, Disinvestment of Profitable SOEs: Reviewing the argument for Privatisation”, in Rehman Sobhan vi. Sectors for Privatization, available at www.bangladeshnews.com, op.cit.

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