Privatization in developing countries is being considered due to the belief that public sector production has not been successful. The debate now focuses on finding the right balance between public and private sector involvement. This paper examines privatization from an efficiency standpoint, aiming to maximize production with available resources. It discusses market failure and the reasons for government intervention in production. The inefficiency of public enterprises is attributed to the lack of incentives for efficiency, such as conflicting goals and limited management independence.