a public corporation, also known as a government-owned corporation (GOC), is a legal entity established by a government to carry out commercial or business activities on its behalf. Unlike private corporations, which are owned by private individuals or shareholders, public corporations are owned and operated by the government.
A Public corporation can be found at various levels of government, including national, state/provincial, or local levels. These entities are typically established to provide essential services or engage in commercial activities that are considered in the public interest. Examples of public corporations include national postal services, public transportation companies, power utilities, and government-run banks.
a Public corporation may have a separate legal status, allowing them to enter into contracts, own assets, and be held liable for their actions. They often operate with some degree of autonomy and are governed by a board of directors or similar governing body. While they may receive financial support from the government, public corporations are expected to generate revenue through their activities and operate in a financially sustainable manner.
Objectives Of Public Corporations
The main objective of a public corporation is to serve the public by providing essential services or meeting specific economic and social objectives. Their activities are typically regulated to ensure transparency, accountability, and adherence to the public interest. However, the extent of government involvement and control can vary depending on the jurisdiction and specific circumstances.
The establishment of public corporations by the government helps to confer a monopoly on these corporations thereby removing duplications that could have arisen if certain essential services were to be provided by private enterprises.
ADVANTAGES OF GOVERNMENT OWNERSHIP OF PUBLIC CORPORATIONS
- Provision of essential services: The government is involved in the ownership of public corporations because of the provision of essential services, which it renders to the public.
- Prevention of exploitation and discrimination: Exploitation and discrimination associated with private and public enterprises are prevented as a result of government ownership of enterprises.
- Creation of more employment opportunities: With the ownership of public corporations vested in the hands of the government, more employment opportunities are created.
- Protection of some strategic industries: Some strategic industries, e.g. oil industry, airport are seaports, are protected against foreign ownership and control.
- Economic development: Government set up public corporations to enhance the economic development of the country.
- A higher standard of living: The provision of infrastructural and social amenities and services by public corporations, e.g. water, roads, airport and electricity, helps to raise the standard of living of the people.
- It confers monopoly: The establishment of a public corporation by government helps to confer monopoly on these corporations thereby removing duplication that could have arisen if certain essential services were to be provided by private enterprises.
- Even distribution of services: With a public corporation, certain services, e.g. electricity, are evenly distributed to many parts of the country.
- Generation of revenue: A Public corporation is set up sometimes to assist the government generate running costs at least or self-sustaining revenue.
- Affordable and cheap services: As a result of the huge capital investments in public corporations, they enjoy economies of large-scale production, which result in the production of cheap goods and services.
how government fund public corporation
Governments fund public corporations through various mechanisms, depending on the specific circumstances and objectives. Here are some common methods:
- Direct Budgetary Allocation: Governments can allocate funds from the national or regional budget to finance the operations, infrastructure development, and investments of public corporations. These funds are typically disbursed based on the government\’s priorities and the corporation\’s budget proposals.
- Subsidies and Grants: Governments may provide subsidies or grants to public corporations to support specific activities or services that are considered of public interest but may not be financially viable on their own. These subsidies can help cover operational costs, bridge revenue shortfalls, or promote social objectives, such as providing affordable housing or healthcare.
- User Fees and Charges: Public corporations often generate revenue through user fees and charges. For example, public transportation companies may charge fares, while utility companies may charge customers for electricity, water, or telecommunications services. The collected fees and charges are used to cover operating costs and invest in infrastructure.
- Debt Financing: Public corporations may have the ability to borrow money or issue bonds to finance their operations and capital projects. The government, acting as the owner, may guarantee the corporation\’s debt or provide loans at favourable interest rates. Alternatively, public corporations may access capital markets directly to raise funds through bond issuances.
- Profit Reinvestment: Some public corporations generate profits from their commercial activities, which can be reinvested in the corporation itself. These profits can be used for expansion, modernization, or improving service quality. In some cases, governments may require a certain percentage of profits to be reinvested back into the corporation or contribute to public funds.
- Public-Private Partnerships (PPPs): Governments may engage in partnerships with private entities to fund and operate public corporations. In PPPs, private companies contribute capital investments and expertise while sharing the financial risks and rewards with the government. This approach allows governments to leverage private sector resources and innovation while maintaining public control and ownership.
It\’s important to note that the funding methods can vary between countries and specific public corporations. The government\’s financial support for public corporations is typically guided by policy objectives, financial considerations, and the need to ensure the provision of essential services to the public.
DISADVANTAGES OF GOVERNMENT! OWNERSHIP OF PUBLIC CORPORATIONS
- Lack of choice by consumers: As a result of ownership of public corporations by the government, which leads to monopoly consumers are denied their right to choose between alternatives.
- Frequent interference: Government officers always interfere in the activities of public corporations and this tends to lower their productivity.
- High level of corruption: There is a high level of corruption in public corporate in because the workers and officials believe that government properties are nobody\’s property.
- Lack of qualified personnel: Inefficient and unqualified personnel are always employed to work in public corporations because such appointments are based on political considerations.
- High level of inefficiency: The required efficiency that would ensure the ma of profit in private enterprise is completely lacking in a public corporation
- High level of bureaucracy: As a result of government ownership of a public corporation, there exists a high level of bureaucracy and red-tapism, which cannot create opportunities for effective performance.
- Neglect of private sectors: Private sectors are sometimes neglected bee the government tends to pay attention to public corporations.
Government instability: As a result of frequent changes of government, the also frequent changes in board corporations, which do not ensure their effectiveness