Public enterprises are called ‘work that god gives people.’ This is because public enterprises guarantee employees high annual salaries regardless of actual results of management, and public enterprise losses are made up by national taxes. The privatization plan was proposed to improve this.
If the privatization plan is executed, there will be some merits. Above of all, services of public sectors will be good quality. The government induces competition among private enterprises as theorized by neo-liberalism, so they can offer the nation a high quality service.
Secondly, the financial burdens of the government will dwindle. Public enterprises have a poor efficiency of management and burden the government financial affairs due to their reckless management. The privatization plan can solve these problems, and the government can achieve the goal of small government. Embraer in Brazil successfully achieved investment of 26 hundred million dollars during 10 years from 1996 to 2006 after public enterprises came under private management. Embrear grew substantially and is leading the world aircraft industries.
Why are people opposed to the privatization plan in spite of many merits? First, there are many examples of failure in privatization. Great Britain attempted to privatize railways. However, rail accidents increased 10 times after the privatization because they only pursued their profits, while they were indifferent to safety. Great Britain nationalized railways again in 2002.
Secondly, the problem is the raise of the charges for each service. Enterprises have the purpose of making profit. Therefore, they can not help raising the rates to cover their profits. The privatization plan of waterworks is a hot potato in Korea. Privatized waterworks businesses of many countries raised water rates from about 40% to over 600%.
Positive points coexist with negative points in all of the policies, so the government has to decide the privatization plan carefully and communicate with people frequently.