2.2.6.3. Divestiture

This third type of privatization is clear from its very name. In this form a private entity buys an equity stake in a state-owned enterprise. However, the private stake may or may not imply private management of the enterprise. True privatization, however, involves a transfer of deed of title from the public sector to a private undertaking. This may be done either through outright sale or through public floatation of shares of a previously corporatized state enterprise.
IDevice Icon Examples of divestiture
Full divestiture of existing infrastructure assets is not very common (Agusan and Barit hydroelectric power plants in the Philippines are examples). However, there are many examples of partial divestiture. Such examples include Beijing and Wuhan airports and Shanghai Port Container Co. in China.

Corporatization occurs when an infrastructure entity (for example, a port or a railway authority) is transformed from its statutory role as a governmental department or a quasi-independent entity subject to the conditions of the relevant sectoral Act (such as the Ports or Railways Act) to a fully commercialized but government-owned body under some form of legislation such as a Companies Act. The aim of corporatization is to increase the organizational flexibility and financial viability of the service provided by an entity by giving it an existence that is legally separate from that of government.
IDevice Icon Example of corporatization
As an example, Indian Railways has moved down the path of commercialization and corporatization. A number of public sector undertakings have been formed for this purpose. These include Container Corporation of India Ltd (CONCOR), Kankan Railway Corporation Ltd and Railtel Corporation of India Ltd.

Copyright © 2008 by Transport Policy and Development Section, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).