Public Corporation 

Public corporation – business organisation owned and controlled by the state/government. 

Features of a Public Corporation 

• ➔ State Owned: The government is the sole owner of public cooperation. This means that the persons who operate the organisation, usually a board of directors, are appointed by the government. 
• ➔ Created by Law: Public corporations are created by the parliament. The powers and duties of each organisation are specified clearly in the act. 
• ➔ Incorporation: Public corporations are businesses that have been incorporated. This indicates that they have their own legal identity. They have the legal power to sue, be sued, and enter into transactions in their own name. 
• ➔ State-funded: The government provides capital. The money mainly comes from tax. 
• ➔ Provide public services: public corporations’ main objective is to provide a public service. 
• ➔ Public accountability: public corporations have to produce annual reports, which are submitted to the government minister in charge of a particular corporation. 

Key Vocabulary 

• Productivity – rate at which goods are produced, and the amount produced, especially in relation to the work, time, and money needed to produce them. 
• Portfolio – Collection(of business interests or products) 
• Infrastructure – basic systems and structures that a country or organisation needs in order to work properly 

Reasons for the Public Ownership of Business (Advantages) 

The amount of business activity in the public sector has fallen in many countries, However, public corporations still do provide a wide range of important services 

• ➔ Save jobs – A government could take power of a failing private company that employs a large number of people. 
• ➔ Serve unprofitable regions – Because some private markets will not deliver important services to unprofitable locations, public corporations will be willing to meet this need, even if it comes at a high cost, because profit is not the main objective. 
• ➔ Fill the gaps left by the private sector – For example, the private sector does not give education or healthcare to everyone except those who can afford it. 
• ➔ Avoid wasteful duplication – Some industries have natural monopolies, which means it is more efficient to have a business that serves the whole market, such as railways, because it reduces the number of resources required ( it’s very costly) 
• ➔ Maintain control of strategic industries -Some industries that are critical to national security, such as energy generation and water supplies, would be better off if they were owned by the government. This will prevent out from another country from gaining control of the country and exploiting it.
• ➔ Natural monopoly – market where it is more efficient to have just one organisation meeting total market demand. 

Reasons against the Public Ownership of Business (Disadvantages) 

• ➔ Cost to the government – Several public firms are losing money. Governments also grant subsidies. (In business, subsidies refer to the government paying a portion of the costs.) 
• ➔ Inefficiency – Public firms are often criticised for their lack of productivity and efficiency. 
• ➔ Political interference – Government intervention frequently causes public firms to suffer. This could happen because various governments have different perspectives on how public corporations should function. 
• ➔ Difficult to control – Some public firms are quite huge, employing thousands of people, making coordination difficult and decision-making delayed. 

PRIVATISATION 

– Is the transfer of public sector resources to the private sector (business) 

Different ways of Privatisation 

• ➢ Deregulation – This will involve removing legal barriers to private sector competitiveness. 
• ➢ Sale of public corporation – Selling public corporations has been a popular method of moving business activity from the government to the private sector. 
• ➢ Contracting out – Many government and local authority services have been outsourced to private companies. Contractors are given the opportunity to bid on services that were previously provided by the government. 
• ➢ The sale of land and property 

Why does Privatisation take place? 

• To generate income – the sales of assets generate income for the government. 
• Due to deregulation – Legal restrictions have been removed, allowing new companies to grow. Buses, for example. 
• To reduce inefficiency in the public sector – many public corporations lacked the incentive to make profit but losses. 
• To reduce political interference -The government really can not use these companies for political purposes in the private sector. They would have complete control over their investment levels, prices, and other factors.