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The role of government in privatisation: an economic model from Denmark

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As industrialised countries go through an economic conversion from public sector industries or government managed companies to privately owned companies, leaders and decision makers are seeking new models. There are very few, if any, economic models that provide a "bridge" or transition from the public or government to the private sector, let alone that have been successful. The issue is, nevertheless, very important today as a number of industrialised and developing countries are moving from governmentally controlled industries to the private sector. This paper focuses upon economic models. One good example is taken from Denmark. Other examples are drawn from the USA and especially the deregulation of the energy industry in California, which makes a good region to study. As a "bell-weather" state for other states in the USA and indeed, internationally, many governments are watching the "great California experiment" in deregulation of energy/power utilities. The economic model from Denmark, which is described below, has also begun to have an impact on California legislative programs being proposed but not yet implemented, for economic development. Further research and analysis will document and analyse such efforts in the future. The issue is clear: global competitiveness does not allow the USA or other countries to wait for the ideal "open or free" markets conditions to restructure its economy. In fact, an argument could be made that such "free markets" never existed in the first place and certainly will not in the future. Instead, new economic models for the privatisation of historical governmental industries must be sought that are public and private collaboration working together, rather than a choice between one or the other form of business and economic development. Other countries have had a tradition of such partnerships. Among them is Denmark, which is leading the way in many areas of economic development. This paper focuses upon one successful set of programs in Denmark: IO and IFU Funds. A description and some evaluative data provide a perspective and potential application to other industrialised as well as developing countries for the privatisation of government industries.

Keywords: venture capital, foreign direct investment, equity investment, government, business

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