Definition: Privatisation

Category: European System of Accounts (ESA)

Sale by government of shares or other equity in a public corporation (ESA 2010).

Privatisation has been, and still is, an important feature of the management of the public sector in many countries.  In fact, privatisation means giving up, by general government, control over a public enterprise by the disposal of shares and other equity on this enterprise.  The scope of this note is larger: it addresses the more general case of sales, by general government, of shares and other equity it owns in some enterprises, without necessarily having control on them or, if having it, without giving up this control.  These sales may be made directly or indirectly.  Moreover, the case of sales of non-financial assets is also dealt with.

Four cases may be distinguished:

 a.  The government sells itself shares or other equity it owns in an enterprise.  This sale is said direct.

 b.  The government owns an enterprise A (most of the time, a holding company): this enterprise sells shares or other equity it owns in an enterprise B, and pays back the proceeds of the sale to government.  This sale is said indirect.

 c.  The government sells non-financial assets it owns.  This is a direct sale of non-financial assets.

 d.  The government owns shares or other equity in an enterprise: this enterprise sells non-financial assets it owns, and pays back the proceeds of the sale to government.  This is an indirect sale of non-financial assets.

In all cases, funds provided to government may take various forms.  They generally have the form of a kind of liquidity, but they may be any type of financial asset.

They may also consist in the redemption of government liabilities, such as public bonds and bills.  In the following, only provision of assets is considered, but this assumption does not change the treatments, which are proposed (ESA 1995). http://ec.europa.eu/eurostat/product?code=KS-02-13-269&mode=view Eurostat, "European System of National and Regional Accounts - ESA 2010", Luxembourg, 2013Eurostat, "European System of Accounts - ESA 1995", Office for Official Publications of the European Communities, Luxembourg, 1996