Privatization of State Owned enterprises to Combat Corruption

This report proposal aims at drawing a necessary framework that is useful in formulating and analyzing how privatization of enterprises that are owned by the state can be useful in combating corruption. The report discusses the background of privatization and corruption in Australia, research question, hypotheses, literature review, and methodology.

PRIVATIZATION AND CORRUPTION 1
Privatization of State Owned enterprises to Combat Corruption
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

PRIVITISATION AND CORRUPTION2
Introduction
Purpose of the report proposal
The report proposal aims at drawing a necessary framework that is useful in formulating
and analyzing how privatization of enterprises that are owned by the state can be useful in
combating corruption.
Background
Privatization of state owned companies refers to the transfer of ownership of the
identified companies to private investors or sectors (Hoppe & Schmitz 2010). It can also be
referred to as purchasing of outstanding shares of publicly traded companies by the private
investors. Corruption can be termed as the form of criminal activity or dishonesty undertaken
by any organization or individuals entrusted with authority or position of power so as to gain
illicit benefits. Corruption within Australia is very uncommon as compared to other existing
countries within the globe. "Transparency International's 2016 corruption Perception index"
ranked the Australia state as thirteenth out of one hundred and eighty countries (Kaufmann et
al 2007). The country with the least corruption rate is New Zealand (Kaufmann et al 2007). The
public sector's corruption in the country is considered to be increasing and is also related to the
rate of corruption within other developed countries (Olken 2011). Corruption within Australia
does not only occur in public institutions but it’s also exists at a very low extent in private
sectors. Some of the sectors were corruption is estimated within Australia are; political parties,
trade unions, and media houses. In the month of January 2018, the Australia institute published
a discussion paper suggesting how trust in the Australian government is historically low due to

PRIVITISATION AND CORRUPTION3
corruption, this was considered as one of the possible reasons why the Gross Domestic Product
of the country reduced as low by a reduction rate of 4% (Kaufmann et al 2007).
Different countermeasures within the state are undertaken to curb damages caused by
corruption. Most of these countermeasures undertaken lie within the judicial system. An
individual convicted of corruption and proved guilty serves a 10 years' imprisonment or/and a
maximum fine of AUD 1.1 million. For a business or an entity that involves in corruption is
penalized with a fine. This fine has a maximum value of AUD 17 MILLION which is thrice the
value of obtained undue benefit. Besides these countermeasures there is also a need of
privatization of public enterprises within Australia since it is easy to monitor the private sector
and also it’s easier to issue out penalties (Kaufmann et al 2007). Privatization of these public
entities will help the government reduce on the budget deficits and also cut debts. It will also
lead to technical efficiency or rather effectiveness in the provision of services (Chowdhury
2006).
Research Question
While analyzing the impact of privatization of Public sectors to combat corruption within
the sector, the following research question will be so useful in carrying out the study and
research.
Is privatization the solution for combating corruption within state owned enterprises?
Hypotheses.

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The following two hypotheses are considered while carrying out the research on the
privatization of public or state owned companies.
Hypothesis 1:
The first hypothesis states that “Privatization of State Owned Enterprises leads to a
reduction of corruption and economic growth”.
Using this hypothesis in the research two variables are considered while proving it. One
of the variable is the ownership is the extent of ownership which considered to be the
independent variable. Using this variable, research will identify ownership in private and public
sectors affects different factors within these enterprises for example business growth, efficiency
of employees, commitment, as well as fraud and embezzlement in the business (Kaufmann et al
2007). The other variable to be considered is foreign direct Investment and is considered as the
dependent variable. Foreign direct Investment (FDI) is referred to as investments done by a
company or an individual within a given country into trade interests situated in another nation.
In summary, it is kind of investment where an entity in one country owns a business venture
within another country(Kaufmann et al 2007). Therefore through the research using the given
hypothesis, the relationship between "Extent of ownership (independent variable)" and
"Foreign Direct Investment (dependent)" will be analyzed(David 2014).
Hypothesis 2:
The second hypothesis states that "Privatization of State Owned Enterprises improves
firm's efficiency".

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While analyzing and proving the validity of the above hypothesis, two variables are two
be used. The one of the variable considered is the "extent of ownership" which is considered to
be the independent variable. The extent of ownership as described in the first hypothesis will
focus at how both private and public sectors own their business as well as how their ownership
affect the different attributes within the enterprises(Kaufmann et al 2007). The impacts of
ownership in both sector on; business growth, resource utilization, employee commitment, and
revenue will be analyzed. The other variable that would be considered while proving the
validity of the hypothesis is “profitability of the firm or business enterprise”, this is considered
to be the dependent variable (Kaufmann et al 2007). The profitability of the firm will be
dependent on the “extent of ownership of the enterprise” and there correlation will be
determined with in the research paper. Profitability of the firm looks at how the firm utilizes its
available resources so as to come up with adequate profits. The costs of production will be
lower as compared to the revenue obtained by the firms. Cost of production looks at cost of
labour, cost of resources and time used in production (Florio 2004).
Literature review
The purpose of the research question is to help in facilitation of progress in the
prevention of corruption particularly in governmental or state owned enterprises within
Australia and other countries. The paper proposes privatization of publically owned enterprises
as the only solution for curbing the corruption. Corruption within state owned enterprises is
very deadly; it can lead to inefficiency, low profitability, and low progress of these enterprise.
Corruption within Australia among State owned companied is uncommon though in some

PRIVITISATION AND CORRUPTION6
neighboring ASEAN countries it is available (Police Integrity Commission (PIC NSW) 2011).
Australia has always been fighting corruption and therefore it has a very strong domestic,
regional, and global action of preventing and exposing it. In the fighting of corruption it includes
the "G20 Anti-corruption working group", "United Nations Convention against Corruption
working Groups", and "APEC Anti-Corruption and Transparency Working Group". There are
strict fights against corruption in the country in that most of the individuals within the state
believe that acquisition of luxury gifts from politicians it's corruption in bribery form (Kemp
2007). Given the fact that there is less corruption in Australia among state owned enterprises,
there is a need to effectively solve it. Besides Australia, there are also other neighboring
countries which are affected by corruption in the public sector where privatization is the
solution. Privatization also has other advantages such as efficiency where there are incentives
of introducing better and new technology and also increase productivity of labor, production is
based on profit motives thus increasing productivity, and also there is development in the
production knowledge where private firms only employ workers and managers with better skills
(Kaufmann et al 2007).
The last one and half decades have greatly witnessed an important shift to
entrepreneurial capitalism from state socialism. The very most visible and important aspect of
path has always been the exuberance with which government of political persuasions are
selling state owned enterprises(SOEs) to private sector and investors with hopes of improving
the generally unsatisfying economic performance of the firms. Privatization has a number of
effects both positive and negative. It may increase effectiveness of the publically owned
companies or may merely lead to their collapse. Research notes that there are numerous state

PRIVITISATION AND CORRUPTION7
owned enterprises that are privatized; by 1991, over 2000 state Owned companies were
privatized in developing countries. Currently a number of countries are awakened to fight
corruption within government enterprises (Alexandra 2012). This because corruption is taken as
antithetical to the intent of public administration. Public administration refers to executive
government taken as an activity or entity. Public administration can refer to authorities, public
offices, agencies, as well as commissions that are delivering government programs and policies.
Corruption is referred always to as breakdown of state owned enterprises and public service
institutions. Currently, anti-corruption state parties to UNCA and the OECD anti-bribery
conventions are finding possible ways of cubing corruption within the sector. A number of
instruments have been applied and accompanied by handbooks, instruction manuals, training
tools, databases so as to guide policy and technical monitoring and implementation programs
that could be useful in maintaining and measuring effectiveness (Mills 2011). Therefore,
privatization of these state owned enterprises should also be considered as one of the
measures that would be useful.
Through the study of the available literature about the existence of corruption in state
owned enterprises, one would come up with the desire of curbing its causes. There are number
of possible ways on how corruption can be avoided in the stated enterprises. In some countries
like Australia, corruption is not very rampant and is not a very big obstacle to trade and
business (David et al 2008). Developed countries are well known for their independent and
well-functioning judiciary, very low corruption levels, and crystal clear regulatory climates.
However in Australia, there is existence of corruption in the mining industry as well as foreign
bribery. Foreign bribery within Australia is covered in the "criminal code", each and every state

PRIVITISATION AND CORRUPTION8
and territories in the state has a unique anti-corruption provisions (De Sousa 2009). Different
countries are using different judicial penalties for corruption, Australia convicts a person to 10
years of imprisonment maximally or/and pay AUD 1.1 million. In china one of the punishments
to corruption is death by hanging which is related to drug punishment. There is less corruption
in Australian police and police within other countries. The rate of corruption within the police is
at 5% and always the state have very effective corruption techniques and mechanisms to detect
and prevent corruption. Other sectors where there is low corruption risks include; legislation,
Public Procurement, Customs administration, Land Administration as well as tax administration.
This because these offices are completely monitored so as to avoid corruption. There are very
high risks of corruption within the natural resources extraction sector within Australia (John et
al 2007). This is because the Western Australia's performance in taxation, licensing, as well as
budgeting is very poor. "Transparency International" has discovered that the sector of mining
within Queensland and Western Australia are very fictile to corruption because of licensing
process weaknesses and failure of operating diligently.
Given the fact that corruption within state owned enterprises can possibly be reduced
through privatization since a number of nations have tried it out (OECD 2012), Privatization also
has some disadvantages given the fact that they are out-weighed by the advantages
(Huisman&Vande -Walle 2010). Some of these disadvantages are; since the private investors
are profit-oriented, they possibly ignore external benefits and external costs such as pollution,
there is also a possibility of these private firms to carryout private monopolies for example use
of trains, charging high prices on electricity, water, and fuel (UNODC 2010).

PRIVITISATION AND CORRUPTION9
Considering the two hypotheses, “Privatization of State Owned Enterprises leads to a
reduction of corruption and economic growth” and "Privatization of State Owned Enterprises
improves firm's efficiency" plus the three variables chosen, there is a possibility of curbing
corruption. The extent of private ownership will be very useful in promoting efficient use of
resource, work commitment by the employees, reduced fraud, and profitability within the
enterprise. The extent of public ownership will protect external costs and the environment but
cannot favor profitability of the business. Foreign direct Investment (FDI) which refers to
investments of one enterprise in a given country with offices in another country can be favored
and easily promoted within privately owned enterprises unlike in state owned enterprises.
Therefore at a given extent, there is need of privatization of some State owned enterprises so
as to increase there efficiency.
Methodology
While conducting the research, Varying methodological components and guidelines are
to be used when building the research process. The research is based on answering one
research question which is seeking to understand how privatization can combat corruption
within state owned enterprises (Batory 2012). While conducting the research two different data
collection methods are proposed; the data collected from these two data collection procedures
will be used in answering the research question as well as proving the hypothesis.
Primary data collection method
While using primary data collection methodology, a qualitative survey is to be
conducted. Carrying out the survey will involve the use of questionnaires that will be useful in

PRIVITISATION AND CORRUPTION10
the collection of primary data. It would be necessary to use online survey sites since they are
flexible, time consuming, and reach a number of individuals.
The participants while applying the primary data collection technique.
The participants in this research are going to be obtained through carrying out stratified
sampling technique so as to obtain the needed individuals. The total number of participants to
be used in the research is 20 individuals who will be interviewed physically on the view of
privatization of state Owned enterprises. Online survey sites for example survey monkey would
also be useful in gaining unlimited information from different individuals without time wasting.
Research design
The research design that will be used while carrying out this data collection technique is
mixed-method design. Mixed-method design involves the systematical evaluation and
summarization of results from various individuals thus increasing the sample size and also
researcher’s ability to study the point of effect (Burch & Carolyn 2016). This will be useful in
obtaining data related to the research question as well as the identified hypotheses. This
research design was used because different researchers and participants are going to be used in
conducting the research. Some of the participants are going to physically participate with the
researcher while others are going to participate through online sites. A mixed-method design is
very important since it combines both qualitative and quantitative data collection techniques
thus thorough evaluation of the problem at hand (Kendig et al 2014. The mixed-method design
at the same time looks so much at the research question than just the methodologies applied
therefore making it easier to come up with enough information.

PRIVITISATION AND CORRUPTION11
Data collection plans
While collecting the needed primary data, there are various methodologies which are to
be applied as described above, some of these are use of questionnaires answered physically
and through online sites. The different techniques which will be used in analyzing the obtained
data are qualitative and quantitative data analysis techniques. Qualitative deals with non-
numerical data while quantitative deals with numerical data (Creswell & David 2018).
Secondary data collection method
Secondary data collection technique deals with obtaining, analysis, and evaluation of
already existing information or data from different sources. The sources of this data are always
known as secondary sources. Some of these sources are; journals, internet databases, academic
books, and many others. While carrying out secondary data collection method, qualitative and
quantitative data collection methodologies could be applied (Anastasia 2015). Qualitative data
collection will focus on the obtaining of non-numerical data which means it deals with
descriptive data from different secondary sources. Quantitative data collection deals with
numerical data rather than descriptive data. Both of these techniques are very wonderful and
strong tools with secondary data collection procedures. While dealing with secondary data
collection there is no need of collection of information from participants rather there is need of
data analysts.
Research design in secondary data collection
While dealing with collection of secondary data, historical research design will be
applied. This deals with collection, verification, and synthesis of evidence from already existing

PRIVITISATION AND CORRUPTION12
information or past information for establishment of facts that refute or defend the hypotheses
(Pearson & Savitt 2015.). Historical design applies secondary sources and numerous primary
documentary evidences, such as official records, diaries, archives, non-textual information
[pictures, visual recordings, maps, and picture]. These sources should be both valid and
authentic to be considered as data sources. Some of the importance of this research design are;
the historical records are helpful in adding useful contextual background that is very required in
fully interpreting and understanding the research problem, with this research design there is
possibility of subject-researcher interactions that could possibly affect the results, and the
approach is best suited for the trend analysis (Gorard 2013).
Data collection plans.
While carrying out the data collection, different sources of data would be used. These
sources should involve how privatization of state owned companies helps in overcoming
corruption with the country. Some of these sources include journals, maps, pictures, diaries,
and archives (Brun et al 2011).
Table 1 showing Timeline for proposed research and tasks
research topic selection 01-10-2018 5-10-2018 7
Data collection from journals, books and others 7/10/2018 8/10/2018 12
research design formulation 24/10/2018 8/11/2018 13
literature review search 8/10/2018
13/11/201
8
7

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research methodology development
17/11/2018
20/11/201
8 16
research techniques selection 1/12/2018 8/12/2018 6
primary data gathering 14/12/2018
18/12/201
8
data interpretation and analysis 20/12/2018
22/12/201
8 4
Findings interpretation 24/12/2018
26/12/201
8 4
Recommendations and conclusion 27/12/2018
28/12/201
8 2
research report estimation 29/12/2018
30/12/201
8 4
final report 1/01/2019
02/01/201
9 1
Figure1 showing comparison of electricity bills with other prices after privatization as one the
secondary data sources to be used

PRIVITISATION AND CORRUPTION14
Ethical considerations
In the research process, well being of the various participants, respect of privacy rights,
safeguard, confidentiality and free will be given attention throughout the research. There will
also ensure strict compliance to the various ethical and legal obligations expected in the
research process.
Implications and Limitations
Implication
Given the many advantages over-weighing the disadvantages of privatization of state
owned enterprises such as; reduced fraud and embezzlement, increased profitability of the
enterprise, increased commitment of the workers, and other advantages; there is need for

PRIVITISATION AND CORRUPTION15
carrying out privatization. The research also will indicate whether the FDI (Foreign Direct
Investment) is high in private enterprises as compared to that in publically owned enterprises
(Rothstein 2011).
The research will be carried out effectively using both primary data collection
techniques and secondary data collection techniques. The information from both of these data
collection methods will be qualitatively and quantitatively analyzed so as to draw conclusions
whether there are impacts of privatization of State owned enterprises when combating
corruption within the country.
Research Limitations
These are some of the foreseen barriers which might occur when carrying out the research.
 There is a possibility of hardly getting the needful participants with prior knowledge
about privatization even though employees from state owned and private enterprises
are requested to involve in the research.
 There is a possibility of failure to obtain the necessary and needed data about the
impact of privatization when curbing corruption in state owned enterprises.
 There is possibility of failing to meet the set timeline while carrying out the research as
identified in the proposal because the obtained information may be strenuous and
ambiguous.

PRIVITISATION AND CORRUPTION16
References
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development.
Kaufmann, D., A. Kraay , M. Mastruzzi. 2007. “Measuring corruption: myths and realities” in
Transparency International Global Corruption Report 2007 Cambridge University Press
Cambridge pp 318-323.
Mills, A. 2011. “Corruption risk factors: a review of 100 NSW ICAC inquiries” paper presented at
Australian Public Sector Anti-corruption Conference Fremantle.
Police Integrity Commission (PIC NSW). 2011. “Preventing Corruption: Lessons from
Occupational Health and Safety” Research and Issues Papers Number 8 June 2011 PIC
Sydney
Olken, B. P. 2011. “Corruption in Development”.NBER Working Paper 17398 September 2011
Rothstein, B. 2011. The Quality of Government: corruption, social trust and inequality in
international perspective.University of Chicago Press Chicago and London
UNODC. 2010. ThematicProgramme on Action against Corruption and Economic Crime 2010-11
Vienna

PRIVITISATION AND CORRUPTION17
OECD. 2012. International Drivers of Corruption: a tool for analysis OECD Publishing Paris
Huisman, W., Vande -Walle G. 2010. “The criminology of corruption” in G. de Graaf, P. von
Maravic and P. Wagenaar (eds).The good cause: Theoretical perspectives on corruption
Burdich Publishing.
Brun, J., Gray, L., Scott, C., Stephenson, K.M. 2011. Asset Recovery Handbook: A Guide for
Practitioners Stolen Asset Recovery Initiative UNODC /World Bank Washington
Batory, A. 2012. “Why do anti-corruption laws fail in Central Eastern Europe? A target
compliance perspective” Regulation & Governance (2012) 6, 66–82.
De Sousa, L. 2009. “Anti-Corruption agencies: between empowerment and irrelevance” RSCAS
EUI Working Paper 2009/08 Robert Schumann Centre for Advanced Studies
Chowdhury, F. L. 2006. ‘’Corrupt Bureaucracy and Privatization of Tax Enforcement’’: Pathak
Samabesh, Dhaka.
Hoppe, E. I.; Schmitz, P. W. 2010. "Public versus private ownership: Quantity contracts and the
allocation of investment tasks". Journal of Public Economics. 94 (3–4): 258–68.
doi:10.1016/j.jpubeco.2009.11.009.
http://www.sciencedirect.com/science/article/pii/S0047272709001492
David, M. 2014. Privatizing Government Services Doesn’t Only Hurt Public Workers. In These
Times. Retrieved 28 June
2014.http://inthesetimes.com/working/entry/16811/privatization_IPTI_report

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John, B., Saul, E., Giovanni, U. 2007. "Methods of privatization and economic growth in
transition economies" (PDF). Economies of Transition. 15: 661–683. doi:10.1111/j.1468-
0351.2007.00300.x. Retrieved 18 June 2017.
https://www.econstor.eu/bitstream/10419/140745/1/514551011.pdf
Kemp, Roger L. 2007. "Privatization: The Provision of Public Services by the Private Sector,"
McFarland & Co., Inc., Publishers, Jefferson City, North Carolina, USA and London,
England, UK. (ISBN 978-0-7864-3250-9)
David, M., Dilip, M., Gonzalo, C., Jaime, S. 2008. "The Distributive Impact of Privatization in
Latin America: Evidence from Four Countries", Brookings Institution Press, p. 162.
Florio, M. 2004. – “The Great Divestiture: Evaluating the Welfare Impact of the British
Privatizations, 1979–1997” (MIT Press, 2004). Book review by William L. Megginson,
Journal of Economic Literature, Vol. XLIV (March 2006) p. 172.
Kendig H, Byles JE, O'Loughlin K, et al.2014. Adapting data collection methods in the Australian
Life Histories and Health Survey: a retrospective life course study BMJ Open; 4:e004476.
Doi: 10.1136/bmjopen-2013-004476
Anastasia, R. 2015. Market Research Techniques: Primary and Secondary Market
Research.https://www.cleverism.com/market-research-techniques-primary-secondary/
Burch, Patricia and Carolyn J. Heinrich.2016. Mixed Methods for Policy Research and Program
Evaluation. Thousand Oaks, CA: Sage.

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M.A., Pearson, Savitt, Ronald. 2015. “Historical Research in Marketing.” Journal of Marketing 44
(Autumn, 1980): 52-58
Creswell, John W. and J. David Creswell. 2018. Research Design: Qualitative, Quantitative, and
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Thousand Oaks, CA: Sage.

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Appendix
Appendix A.
INFORMATION SHEET
The career impact of winning a work-related award
My name is Bron Harrison and I am a studentat UTS.
This research is to find out about the impact of winning an award on an individual.

PRIVITISATION AND CORRUPTION21
I will ask you to answer a short questionnaire.All information will be kept confidential and any
information you provide will be de-identified before analysis.
There is some inconvenience because I will ask you to take about 5 minutes to complete the
survey.
You are able to give me the information I need to find out about because you have won an
award.
You do not have to say yes because participation in the research is voluntary. If you say no,
nothing will happen. I will thank you for your time so far and will not contact you about this
research again. You can change your mind at any time and you do not have to say why. I will
thank you for your time so far and will not contact you about this research again.
If you have concerns about the research that you think I or my supervisor can help you with,
please feel free to contact me on [e-mail] my supervisor on
[e-mail].
If you would like to talk to someone who is not connected with the research, you may contact
the UTS Ethics Secretariat on [e-mail].
By answering these questions it is assumed you have provided your consent to participate
willingly in this research. We thank you for your time.
Appendix B.
Questionnaire and Survey question form.

PRIVITISATION AND CORRUPTION22
1. According to your own research, at what extent is the level of corruption within State owned
Companies?
A.Very High
B.High
C.Low
D.Very Low.
2.Do you think Privatization of Public companies can be a better solution to the corruption?
A.It might reduce.
B.Not even close.
C.It’s the better solution.
D.I don’t know.
3. Are you aware of any state Owned companies that were privatized?
A.A number of them.
B.Very Few of them.
C.None of them.
D.Am confused.
4. Did privatization reduce on the levels of corruption within those countries?
A.It reduced in all the companies.

PRIVITISATION AND CORRUPTION23
B.It reduced in a few of them.
C.It didn’twork out.
D.I don’t know.
5. Did privatization of SOEs increase efficiency within these companies according to your
research?
A. Yes
B. No
C. I don’t know.
6. According to your own observation, how can you compare the companies' involvement in
Foreign Domestic Investment(FDI) before and after privatization?
A.Companies' involvement in FDI increased after privatization.
B.Companies' involvement in FDI reduced after privatization
C.The company does not involve in Foreign Domestic Investment in any manner.
7. What’s your say in your own words, Is privatization necessary to State owned enterprises?
............................................................................................................................
8. Can privatization be an efficient methodology to overcome corruption within state owned
companies in Australia and other countries?
...................................................................................................................................

PRIVITISATION AND CORRUPTION24
Appendix C.
Table showing corruption perception Index among countries in 2017. Source: (Transparency
International, 2017),
https://www.transparency.org/news/feature/corruption_perceptions_index_2017

PRIVITISATION AND CORRUPTION25