(a) Define the following terms
(i) nationalization (ii) Indigenization (iii) commercialization (iv) privatization
(b) state four reasons why government should participate in business
Explanation
(a)Definition of terms for economic policies:
i. Nationalization: This is the taking over by the state the management and control of a business that formerly belongs to individuals (locals and foreigners). The business now belongs to the government.
ii. Indigenization: This is a deliberate policy by government to restrict ownership of a specific line of business in a country to the indigenes so that no foreigner would invest into such businesses. The aim is to reduce foreign domination of the country's economy.
iii. Commercialization: This is a policy of the government geared towards making state owned enterprises to become efficient and profit oriented. The commercialized companies are expected to generate enough income from their operations to finance themselves. Thus the business will be expected to charge economic rate for their services.
iv. Privatization: This is the transfer of management and control of a business owned by the government to private individuals or groups. This is done to allow for competition and efficiency.
(b) Reasons for government participation in business:
i. To create employment opportunities for the citizens/increase in standard of living.
ii. To ensure the provision of certain vital utilities that the citizens will not be attracted to go into because of the meager returns.
iii. To provided essential facilities at affordable prices for which the citizens would have paid highly if provided by private companies.
iv. To reduce duplications and wastages of resources compared to where many people are allowed to provide such facilities.
v. To ensure the security of the country especially in the case of key industry,
vi. To provide the capital required in the case of projects that require huge capital outlay.
vii. To make for even development within a country/ political reasons.
viii. To prevent private monopoly and profiteering.