Public enterprises pdf

One of the arguments for privatization is that public ownership means an absence of real accountability. If accountability is poor and improvements not possible, the case for privatization becomes much stronger. The management and control of public corporations are necessary in order to have effective and efficient public enterprises. The management of public corporations is done through the management boards and the policy board.

The Executive Board: In the executive board, majority of the board are staff of the organisation. They are usually the heads of the various departments of the organization. However, a few outside representatives are brought to be in charge of some outside interest. The Policy Board: Majority of the members of the policy board are from outside the organization with few members from within the organization.

The policy board is responsible for managing all the policy decisions of the organization, but the implementation of policies and the day-to-day operation of the organization are carried out by the Managing Director. This method is applied to most public corporations in Nigeria. Even though public corporations are created to enable them have some degree of freedom to manage their affairs, they are still subject to various levels of control.

Ministerial Control: The supervising minister controls the public corporations under his portfolio in the following modes: i.

By the appointments of Board members since the minister is politically responsible for appointing members of the board, he can dissolve it, if he is not satisfied with their performance. These controls may include the appointment of external auditors to audit the account of public corporations, re-organisation of departments and controls on borrowing.

Parliamentary Control This control is necessary to ensure that the operation of public corporations is in accordance with public policy. Such a control is through the Annual Report. Public corporations are expected to submit comprehensive annual reports of their activities to the parliament through the minister and such reports are tabled before the parliament.

Virtually all public corporations in Nigeria render epileptic and unsatisfactory service to the people. Due to problems faced by public corporations in Nigeria in the recent past, which included corruption, inefficiency and poor management, the Nigerian Government attempted to solve these problems by taking certain measures. A commission was set up under Michael Ani, the then Minister, to look into the problems of public corporations and make appropriate recommendations.

The Ani Commission recommended that the responsibility for personnel matters be removed from the boards and entrusted to an independent body to be called the Statutory Corporation Service Commission SCSC. The recommendations were implemented at both the Federal and State levels. However, after its review in the early s, the Udoji Commission recommended that it should be abolished. The government accepted the recommendation and SCSC was eventually abolished. The second option to solve the problems of public corporations by the government was to invite foreign management consultants to manage some of them.

In , the Federal Government brought into the country some experts to manage public corporations. The government later terminated these agreements and reverted to the previous methods of management. Section 14, Decree No. From the above definitions one can easily deduce that there are forms Privatization namely: a Full Privatization and b Partial privatization 19 P a g e Public Enterprise: compiled by.

Privatisation and Commercialisation: Privatization is the fact that business should be left for those who are better qualified to handle them, which is the private sector, while the government concentrates on its core duty of governance and policy regulation through the ministries. Government involvement in business takes the form of regulation and this is done through its agencies. The main motive about government regulation in a purely private sector, amongst other things, is to achieve public policy objectives of financial stability, high economic growth, stable prices, full employment, levels of output and equilibrium and balance of payments position.

This privatization, without adequate regulatory agency measures, will mean allowing laissez-faire attitude pervade the economy which may lead to what is known as economic disorder and financial chaos. Businessmen driven by the pursuit of profit, employ both ethical and unethical means. It is only law that will restrain their activities thereby protecting the people, business and society in general. Privatisation and Public Corporation: In the Nigerian context, privatization involves the disposal of all part of shares held by the government directly or through any of its agencies.

Privatisation involves the sale of government shareholding in any enterprise to non-governmental entities. Commercialisation: This is the re-organisation of enterprises wholly or partly owned by the government in which such commercialized enterprises shall operate as a profit-making commercial venture and without subvention from the government. The decree provides for the establishment of the Technical Committee on Privatization and Commercialization TCPC which is vested with the responsibility of implementing the programme.

Objectives 1. To re-orientate the enterprises for commercialization towards a new horizon of performance improvement, viability and overall efficiency through the enforcement of strict commercial principles and practices. To develop the capital market. To restructure the capital of affected enterprises in order to facilitate good management and access to capital market.

To restructure and downsize the public sector in order to lessen the dominance of unproductive investments in that sector. To ensure positive reforms on public sector investments in commercialise enterprises. To check the present absolute dependence on the treasury for the funding by the otherwise commercially-oriented parastatals and encourage their approach to the capital market.

To initiate the process of gradual cession to the private sector of such public enterprises which by their nature and type of operations are best performed by the Nigerian capital Market.

To promote wide share ownership. To undertake a comprehensive review of the accounting and management information system of the parastatals with a view to installing and maintaining modern and effective accounting systems which will produce promptly the necessary data for monitoring their financial and operational performance. To create a favourable investment climate for both local and foreign investors.

Methods of Privatization: the technical committees on privatization and commercialization TCPC now known as Bureau of Public Enterprises BPE developed five main approaches for the privatization of public enterprises.

Public Sales of Shares: This method which is affected through the Nigerian capital market enables such enterprises to be on the Nigerian stock exchange. In such enterprises private placement of shares are always made. Sales of Assets: There are some public enterprises which have unimpressive track records and besides, the future outlook of such public enterprises is deemed hopeless.

In case of this type, such ventures are liquidated and their assets sold piecemeal through public tender. Management Buyout: Under this approach the entire affected or a substantial part of its equity capital is sold to the workers. Deferred Public Offer: Some public enterprises may be considered viable and it is reckoned that if such public enterprises are sold by shares, the anticipated revenue will be lower than the real values of their underlying assets.

Many hotels were privatized through this approach. If you work for a government run industry, managers do not usually share in any profits. However, a private firm is interested in making a profit, and so it is more likely to cut costs and be efficient.

Since privatisation, companies such as BT and British Airways have shown degrees of improved efficiency and higher profitability. Lack of political interference: It is argued governments make poor economic managers. They are motivated by political pressures rather than sound economic and business sense. For example, a state enterprise may employ a surplus worker which is inefficient. The government may be reluctant to get rid of the workers because of the negative publicity involved in job losses.

Therefore, state owned enterprises often employ too many workers increasing inefficiency. Short term view: A government many think only in terms of the next election. Therefore, they may be unwilling to invest in infrastructure improvements which will benefit the firm in the long term because they are more concerned about projects that give a benefit before the election. Shareholders: It is argued that a private firm has pressure from shareholders to perform efficiently.

If the firm is inefficient then the firm could be subject to a takeover. Increased competition: Often privatisation of state owned monopolies occurs alongside deregulation — i. It is this increase in competition that can be the greatest spur to improvements in efficiency. For example, there is now more competition in telecoms and distribution of gas and electricity.

There is also very little competition within the rail industry. Government will raise revenue from the sale: Selling state owned assets to the private sector raised significant sums for the UK government in the s. However, this is a one off benefit. It also means we lose out on future dividends from the profits of public companies. For example, tap water has very significant fixed costs. Therefore there is no scope for having competition amongst several firms.

Therefore, in this case, privatisation would just create a private monopoly which might seek to set higher prices which exploit consumers. Therefore it is better to have a public monopoly rather than a private monopoly which can exploit the consumer. Public interest: There are many industries which perform an important public service, e. For example, in the case of health care, it is feared privatising health care would mean a greater priority is given to profit rather than patient care.

When doctors treat patients, they are unlikely to try harder if they get a bonus. Government loses out on potential dividends: Many of the privatised companies in the UK are quite profitable. This means the government misses out on their dividends, instead going to wealthy shareholders. Problem of regulating private monopolies: Privatisation creates private monopolies, such as the water companies and rail companies.

These need regulating to prevent abuse of monopoly power. Therefore, there is still need for government regulation, similar to under state ownership.

Fragmentation of industries: In the UK, rail privatisation led to breaking up the rail network into infrastructure and train operating companies. This led to areas where it was unclear who had responsibility. For example, the Hatfield rail crash was blamed on no one taking responsibility for safety. Different rail companies have increased the complexity of rail tickets. Short-termism of firms: As well as the government being motivated by short term pressures, this is something private firms may do as well.

To please shareholders they may seek to increase short term profits and avoid investing in long term projects. For example, the UK is suffering from a lack of investment in new energy sources; the privatised companies are trying to make use of existing plants rather than invest in new ones.

Conclusion: The Future of Public Enterprise In any discussion about public enterprise, it is necessary to address questions of organization and management as well as ownership.

Both have been problematic in practice and have led to governments reducing their reliance on public enterprise as an instrument of policy. There are really two options for the future. The first is to improve the sector, aiming for greater efficiency and better public control, hopefully permitting 23 P a g e Public Enterprise: compiled by. Improvements can be made, particularly in accountability, and public enterprise can continue. The second perspective is that whatever is done, public enterprise is still just that, public and enterprise and from this inherent conflict between government and market stems inefficiency and the endemic problems of accountability.

The option then is to dispose of assets. There were some public enterprises that could be privatized with little adverse effect. There seems little point in hindsight for governments owning banks, insurance companies or airlines. On the other hand, the privatization of public utilities has not reduced demands on government to regulate them.

In many countries there were political consequences long after the relevant utilities were taken from the public sector. Indeed, there was little public support or political pressure in favour of privatization, but governments saw the opportunity to raise some optional income.

This was probably a more important motivation than ideology. The response of most governments to the question of public enterprise has been to privatize in those circumstances where it could be done, so to a great extent, the experiment with government ownership of enterprises is finishing. There may even be benefits for consumers in the long run, although they have been slow in arriving.

In the final analysis it seems difficult to see any long-term future for the public enterprise sector in any advanced or developing country, especially for those enterprises supplying goods or services on a large scale. There may be a continued existence for smaller enterprises or ones set up in cooperation with the private sector, but that will be all. The reduction of the public enterprise sector in the s and s says something about the public sector in general.

The fact that government entities may have lasted a long time is no guarantee of continued existence. The shrinking of government through privatization occurred through a process of economic theory feeding into policy-making. The same process is occurring in the core public sector, where the results may be even more significant than in the once-important public enterprise sector.

Except for small-scale activities, it is likely that public enterprise will eventually disappear as an acceptable way of delivering private goods and services. Public Administration in Nigeria. London: Longman Donahue, John D.

Dwivedi, O. Fubara, B. Government in Business Management in Nigeria. Lagos: Spectrum Jackson, Peter M. Jorgensen, Jan J.

Jaeger and Rabindra N. Kay, J. Millward, R. Ohashi, T. Sexty, R. Ujo, A. The Government sector, the public administration and ultimately the public enterprises in these countries have been greatly influenced by the colonial powers that ruled them.

India is a good example of this trend where even today the Railways are the biggest example of a successful public enterprise. Even the countries with no colonial history like Iran and Turkey, the public enterprise was used a tool to bring about economic, political and social changes, particularly in Turkey after the demise of the Ottoman Empire and formation of the modern Turkey.

The history of public enterprises in the USA dates back in the nineteenth century and was characterized by the state chartered banks in which the Federal Government has significant portion of the stocks. The formation of the Panama Rail Road Company in was another victory of the public enterprise system.

The growth of public administration and enterprises reached its peak under Franklin D Roosevelt and the Tennessee Valley Authority became the most emulated model of public corporation.

There are several factors that have contributed the growth of public enterprises in the recent times. The governments have used it to guide and command the economy; they own the strategic industries, functions and agriculture and also try to fill the inadequacies of the private sector. The outcomes of all these factors were the active participation of governments in industrial and commercial enterprises. At present, governments of almost all countries in the world are participating in economic activities in one or the other way.

Private sector is hesitant to develop those industries where heavy investment is required and gestation period is long. State enterprise is considered necessary to reduce economic inequality and to prevent concentration of wealth in a few hands. In India, a socialistic order has been established after independence. The Industrial Resolution of and have clearly defined the role of public and the private sectors. The government has reserved for itself basic and other strategic industries. A complimentary role has been assigned to both private and public sectors.

At present, public sector enterprises are engaged in manufacturing, trading as well as service activities. State enterprise is an undertaking owned and controlled by the local or state or central government.

Either whole or most of the investment is done by the government. The basic aim of a state enterprise is to provide goods and services to the public at a reasonable rate though profit earning is not excluded but their primary objective is social service. Public enterprises are financed by the government. They are either owned by the government or majority shares are held by the government. In some undertakings private investments are also allowed but the dominant role is played by the government only.

Public enterprises are managed by the government. In some cases government has started enterprises under its own departments. In other cases, government nominates persons to manage the undertakings. Even autonomous bodies are directly and indirectly controlled by the government departments. Though investments in government undertakings are done by the government, they become financially independent.

They are not dependent on the government for their day- to-day needs. These enterprises arrange and manage their own finances. An element of profitability is also considered while pricing their products. It has helped the enterprises to finance their growth themselves. The primary aim of state enterprises is to provide service to the society. These enterprises are started with a service motive.