Financial Interrelationships Between Public Authorities And Public Enterprises

Report on the financial aspects of state intervention in public enterprises in Pakistan - outlines development of the public sector, the nationalization period from 1972 to 1977 and industrial investment under national planning; notes industrial policy on pricing, the extent to which financial losses are covered and subsidies provided; lists public enterprises.

Many studies have highlighted how failures of public corporations (otherwise known as state-owned enterprises) can result in huge economic and fiscal costs. To contain the risks associated with these costs, an effective regime for the financial supervision and oversight of public corporations should be put in place. This note discusses the legal, institutional, and procedural arrangements that governments need to oversee the financial operations of their public corporations, ensure accountability for their performance, and manage the fiscal risks they present. In particular, it recommends that governments should focus their surveillance on public corporations that are large in relation to the economy, create fiscal risks, are not profitable, are unstable financially, or are heavily dependent on government subsidies or guarantees.

Originally published in 1971, when nationalized industries employed about 7 per cent of the national labour force, created about 10 per cent of the gross domestic product and had annual investment programmes which were equal to those of all private manufacturing put together. Even this understates the scope of public enterprise at the time, since there were many other organizations, ranging from the BBC to the Public Trustee, which were semi-autonomous public enterprises, but not nationalized industries. Moreover, the public enterprise sector continued to grow, even under Conservative governments, and there were many reasons for thinking that no government would succeed in reversing this trend, for it was felt unlikely that, as government became more complex, it would disgorge many new activities which would be given a semi-autonomous, that is, public enterprise status. The author, drawing on personal experience, shows that the facts of ministerial and parliamentary control were very different from what the public and Parliament thought at the time. He describes the very great practical independence of the Boards and also how much Ministers had come to rely on persuasion (which not only can impose serious waste of time and money on both Boards and Government but is also inefficient). Ministers have least power where the aims of public enterprise are social rather than commercial. If there were no changes, the growth of public enterprise to achieve social purposes would mean an important decline in the power of Parliament and Ministers. This book explores solutions to this problem and concludes that the government must build up a cadre and capacity for financial control which at the time were lacking to it.

Public enterprises have played a central part in the development of all mixed economies in the post-war period, but they are now in a crisis phase. Privatisation has pushed back the level of public enterprise almost throughout the world. Where public enterprises remain, they are being brought under significant reforms. Originally published in 1991, this book presents a comprehensive critique of public enterprise, analysing why its performance has fallen far short of expectations. Part one is concerned with the establishment of public enterprises: the case for them, the circumstances in which they emerged, the extra enterprise objectives attached to them, and the decisions on their investment feasibility and capital structure. Part two looks at the working of public enterprises: the state of their financial performance, the peculiarities of pricing, the determination of targets which they should meet, the continuous monitoring and evaluation of their operations. Macro concerns are the focus of Part three. Among the issues addressed are the level of indirect taxation and subsidisation implicit in the pricing structures of public enterprises, the links between public enterprise and the public exchequer and the implications of their operations for distributional equity. In Part four the extent to which privatisation can solve the problems of public enterprise is discussed. The book ends with some broad conclusions on the future of public enterprise. Throughout, the approach is analytical, but the arguments are supported by extensive examples from both developed and developing economies.

This book contains a study of the economics and management of public enterprises in Pakistan. It examines their performance, organizational behavior, relationships with other government organizations outside of the sector, and the issues that confront the public enterprise sector and the government.

This book tries to systematize the lessons learned in the past two decades of public enterprise reform to correct the perceived deficiencies of state-enterprise sectors in Africa, Asia, and Latin America. It addresses the macroeconomic adjustments typically required in the effort to fashion a more open and competitive economy - liberalizing trade and ending preferential treatment for state enterprises; shifts toward market-oriented financing in the banking system; moves toward market pricing and reforming the institutional structure for setting tariffs; and establishing more competitive and evenhanded compensation and staffing policies in state enterprises. It argues that with macroeconomic reforms under way, government needs to ground its reform of state enterprises in an assessment of the purposes to be served by its state-owned sector. It describes how reforming the relationship between government and its enterprises entails striking a delicate balance between autonomy and accountability. The report examines the mechanisms used by governments in a variety of developing countries to set goals for state-owned firms and to evaluate their performance. It addresses the promise and the risks of privatization, whether through outright sales, management contracting, leasing, franchising, contracting-out, or encouraging new entrants into the private sector. It also offers an overview of the task facing governments with a failing public enterprise sector.