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Outline the opportunities and challenges for the Irish economy of the privatisation of state owned enterprises. - Leaving Cert Business - Question A - 2014
Question A
Outline the opportunities and challenges for the Irish economy of the privatisation of state owned enterprises.
Worked Solution & Example Answer:Outline the opportunities and challenges for the Irish economy of the privatisation of state owned enterprises. - Leaving Cert Business - Question A - 2014
Step 1
Opportunities
Answer
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Increased Revenue: Privatisation creates much-needed revenue for the Irish economy. The Irish government has been under pressure from the Troika to sell state assets to raise finance and mitigate the national debt.
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Investment in Infrastructure: The funds generated from privatisation can be used for crucial infrastructure improvements, which can enhance economic growth. For example, the privatisation of companies like Bord Gáis has provided financial resources for further development.
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Debt Reduction: Selling state enterprises can help in repaying the national debt, thus fostering a healthier economy.
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Reduced Financial Commitments: The government does not need to shoulder the burden of keeping unprofitable state enterprises afloat, which reduces public financial commitments.
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Improved Access to Capital: Privatised firms can sell shares, thereby increasing access to capital. This allows the companies to expand and create more jobs, thus positively impacting the economy.
Step 2
Challenges
Answer
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Profit Dependency: Privatised companies may struggle to survive primarily due to their profit-driven nature. This can lead to essential services being neglected if they are not profitable.
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Reduced Control: The government may lose some level of control over critical services, which could affect service delivery and consumer rights.
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Employment Risks: The shift to private ownership might result in job losses as firms may seek to cut costs. This was evident in the transition of Aer Lingus after its privatisation.
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Market Competition Concerns: Increased competition can sometimes lead to inefficiencies, as companies focus primarily on profitability rather than quality of service.
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Loss of Strategic Assets: The government may lose control over vital assets essential for national interest, limiting its ability to respond to crises. This was a concern highlighted in the privatisation discussions about Bord Gáis.