Privatization is the opposite of a government-owned operation. Private companies can run operations without the government's control. Full privatization occurs when all or most of the interests of a government agency in an asset are transferred to the private sector (for example, electrical utilities being turned over to private companies). Private companies can run operations without the government's control.
Privatization refers to transferring ownership of government-owned assets (such as public companies) to private investors, typically on a contract basis.
This is most commonly used when the government is under financial stress and agrees to sell off public companies to raise capital. This frees up government resources, which can be re-invested in other areas (or spent on campaigning if it's an election year).
Other than generating free trade, most privatizations are undertaken in developed economies incorporate specific terms and conditions, such as requiring the government to retain ownership of the lands that formerly housed public companies, with the stipulation that no new government buildings can be built in the areas currently occupied by the privatized companies.
Laws concerning privatization provide the authority and procedural requirements for transferring a public service into private ownership. For example, the rules typically specify that any entity or person seeking to transfer a public service must meet several criteria, such as demonstrating that private ownership will provide sufficient efficiency and safeguard against political interference. Such laws also often prohibit deals between parties that have potentially conflicting interests.