Objectives Of Public Enterprises In Developing Countries

Objectives Of Public Enterprises In Developing Countries

What are the Objectives of Public Enterprises?

Because of this narrow outlook, he would refuse to undertake any venture in which “his’ profits are ‘unattractive’—even if the other three flows which accrue to other citizens in society are sizeable. Plans have been made on the basis of ‘the victory of socialist resolution’, aiming at ‘getting greater, quicker, better and more economical results to build socialism’. Power of local govern­ments in the management of industrial construction and production has been ever increasing in Poland, Yugoslavia and other socialist countries. Excluding the officers taken from government departments on deputation, the employees of public corporations are not civil servants and are not governed by government regulations in respect of conditions of service. The recruitment is not subject to Civil service rules, promotion is by seniority and personnel can be fired easily if they are incompetent. Public Sector Accounting is an information system that measures financial information in the public sector for the purposes of planning, appraisal, reporting, evaluation, and management. To ensure the updating of the accounts of all commercialised enterprises to ensure financial discipline.

The profits earned by public enterprises are reinvested for ex­pansion and diversification. Moreover, public sector concerns like banks and financial institu­tions mobilise scattered public savings thereby helping the process of capital formation in the country.

  • Gone are the days, when only the Public Sector was prevalent in the economy.
  • In a capitalistic society the poor becomes poorer and the rich becomes richer.
  • Some public enterprises are placed under public ownership because, for social reasons, it is thought the service or product should be provided by a state monopoly.
  • If the public sector industries develop the same can check the growing disparities and maintains a balance.

Public enterprise is a business organization established by the government holding more than 50% of the total share with the aim of producing and distributing goods and services at a reasonable price to the public. Public enterprises are established by the government contributing total or majority capital. The government invests at least 51 percent of the total amount of paid up capital.

In the alternative, it granted license to a private enterprise for the management of natural or national monopolies and where public bodies were involved in managing economic ventures, such bodies did not enjoy financial autonomy. Public enterprises made a very strong appearance after World War I for a variety of reasons, including managing the consequences of war, especially the economic crisis of the 1930s. However, public enterprises sector develop rapidly because of the spread of Keynesian interventionist. Between the two World Wars, political and ideological consideration prompted the establishment of parastatals in the former colonial metropolis. Traditional budgetary control system is being followed by the public sector undertakings like private sectors. It is interesting to note that the technique of classifying expenditure in the budgets does not have any relation with its actual performance although the same becomes necessary for performance budgeting and future estimates.

Government may specify the economic roles of state enterprises and the target rates of their return. To influence future social, political, economic or financial environment for optimal growth of the economy.

In Cameroon for instance some are strictly owned by the government while in some the government own the majority of shares for example SONARA is owned by the government and some private individuals. These are industries that were owned by private individuals which have been taking over by the government they are managed by boards of government they are managed by boards of directors. The general manage is appointed by the presidential degree or an art of parliament the presidential degree or an act of parliament. From the above discussion it may be stated that internal audit is the .independent appraisal of activity within an organisation for the review of accounting, financial and other business practice as a protective and constructive arm of management. Thus, internal audit in many cases includes internal control and checking. Practically, internal audit is a tool of management for ensuring efficient working, compliance with plans, policies, procedures, rules etc. which are very significant in the present day business world.

Related Content

At present, many countries have adopted the policy of Privatisation, through which Private Sector is also gaining importance. For the progress and development of any country, both the sectors must go hand in hand as only one sector cannot lead the country in the path of success. The private sector comprises of business which is owned, managed and controlled by individuals.

What are the Objectives of Public Enterprises?

Even if we look at the profit­ability position of public enterprises in India, we find that the situation is not as alarming as pointed out by many critics. There is another case of expanding public enterprises in the form of building-up powerful state capitalism . Both Communism and Fascism glorify the state above the individual.

Economics From 4 Art

Since the supreme motive of the state is to serve the people in the best possible way, state-run industry will always try to maintain the quality of its products at a higher standard and reasonable price. And no artificial shortage should be created by public sector which mostly happens in private sector. The process of taking over private enterprises of transferring https://accountingcoaching.online/ the ownership of private enterprises to government is called nationalization. The creation of a public enterprise raises some important legal issues. These are enterprises where the government is the majority shareholder in a partnership with private entrepreneurs. In such companies, government usually dominates the board since it is the major shareholder.

What are the Objectives of Public Enterprises?

If you are having trouble seeing or completing this challenge, this page may help. If you continue to experience issues, you can contact JSTOR support. It includes every relationship which established among the people. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU.

Chapter 3 :business Unitorganisation

If private sector is given a free hand, industrialization can lead to the abuse of the customers. Government wants to develop all types of industries whether they are profitable or not. Private entrepreneurs invest only in those industries where profit earning chances are more. They will not invest in an undertaking where profits are low irrespective of its utility for the people.

  • It is an industrial or commercial undertaking, which involves in the production and distribution of goods and services in order to meet its expenses.
  • Second, a public enterprise, by its nature, mostly manages public resources, especially public money and this means that attention must be paid to mechanisms for enforcing accountability.
  • Concentration of economic power restores in the hands of a few under private sector.
  • Therefore, many of the public sector industries have come up because of the foreign aid to such industries.
  • The goal is to show that government resources have been approved and handled appropriately by ensuring that government funds are applied honestly, following right procedures, and staying within budgeted levels and legal restrictions.
  • It is established for the public service and welfare, sound industrial and commercial base and upliftment of economy of the country.

Transferring the commerical risk to the private sector so that the funds are invested in able projects. However, in the case of Public Sector Joint Stock Companies, the entire stock of the company may be contributed by the government and consequently, all the Directors are appointed by the government.

Public Enterprises And Economic Policy: A Comment

As a result, State participation in the field of economic activities is ever increasing. The public enterprises run as per the whims of the government, and as such, the economic policies and plans of the government are implemented through public enterprises. When private sectors are given a free hand, they will lead to getting more profit by exploiting the people. This will lead to the concentration of economic power in the hands of a few persons. Thus to ensure the welfare of the citizen of a country, the state or government takes commercial endeavor, which is commonly termed as public enterprise or state enterprise or corporation.

  • To advise the NCP on further public enterprises that may be commercialised.
  • It includes every relationship which established among the people.
  • A social system consists of two or more individuals interacting directly or indirectly in a bounded situation.
  • It is a system of governance and includes the body of individuals who are authorised to administer the laws of a Nation.
  • If industry is left entirely in the private hands, it leads to monopolistic tendencies which are against the interests of the masses.

Governments may also use profitable entities they own to support the general budget state-owned enterprises that may or may not be expected to operate in a broadly commercial manner and may or may not have monopolies in their areas of activity. It is needless to argue that the basic goal of a social­ist pattern of society could not be achieved with­out improving the existing pattern of income and wealth distribution. This is possible by raising in­comes at low levels, while simultaneously reduc­ing it at the top.

Key Differences Between Public Sector And Private Sector

Government revenue is derived from the public in the form of taxation, fines, fees etc. whereas business concerns obtain their income principally from the sales of goods and services. Uses financial reports to develop and maintain a management information system, capturing real time, the past, present and emerging development and behaviour patterns of various Government organizations. Control is exercised through cash limits that provide a system of government control of expenditure during the financial year. Government can exercise control by giving specific directions concerning prices production costs and social goals.

  • Sometimes the government receives foreign assistance from industrially advanced countries for the development of industries.
  • The top 20 commercial banks were nationalized, among other things, to prevent bank-funds being used for building up private industrial and commercial empires.
  • Nonprofit public enterprises are businesses that are owned and operated by the government to provide a public service.
  • Public sector organizations always have some social objectives as well.
  • Practically, internal audit is a tool of management for ensuring efficient working, compliance with plans, policies, procedures, rules etc. which are very significant in the present day business world.

A social system consists of two or more individuals interacting directly or indirectly in a bounded situation. A social system is a characteristic network of interdependent human patterns, relationships, structures, stories, practices, and institutions that shape the lives and consciousness of the people in a society. Common interests and common objectives are not necessary for society. It provides qualitative goods and services of daily necessity at a reasonable price.

Conversely, for social reasons they may receive hidden subsidies or enjoy additional protection not available to competitors. Such factors tend to distort the normal commercial operations of the corporation or the company and often lead to managerial disorientation. Partly because of these noncommercial considerations, public enterprises may appear to be highly inefficient and, in times of difficult trading conditions, may be a drain on public resources. However, the measurement of the efficiency of a public enterprise is no easy matter. When it produces a marketable product, such as coal or steel, that competes with other products, the normal commercial criterion of profit may be adopted to assess its performance. In the case of a utility enjoying monopoly power, economists have developed concepts like cost-benefit analysis as a performance measurement tool.

Public sector organizations always have some social objectives as well. Sometimes governments establish some institutions with key objectives to provide some grants during unemployment. Some departments try to provide a job for common people in the country. Agrawal, „Public enterprises are established, controlled and operated by the government to produce and supply goods and services to the society.“ The following points highlight the seven crucial objectives of public sectors in a mixed economy. Private sector will have to provide goods and services on a competitive basis.

Public Enterprises Structures are agencies or entities owned and operated by a government to provide goods or services to the public. The main objective of a commercial enterprise is to maximize profit while that of Government is to provide adequate welfare to the people at the reasonable costs. They often, but not necessarily, are headed by a board of directors, commission, or other appointed body.

State enterprises are established to implement economic policies of the government. The primary objective of the state enterprises is to serve the people and help in creating an environment of industrial activity. Many public enterprises have developed townships, What are the Objectives of Public Enterprises? schools, col­lege and hospitals for their workers. Public enterprises were set up to accelerate the rate of economic growth in a planned manner. These enterprises have created a sound industrial base for rapid industrialisation of the country.

Besides this, public enterprises lead to balanced economic growth by undertaking business projects in all fields. The establishment of public enterprises leads to public welfare because the government enters into the business field with prime consideration of rendering services. They include, ironically, one of the world’s models for such undertakings, the Tennessee Valley Authority, established in 1933. In 1970 the U.S. postal system, until then a department of the executive branch of the federal government, became a government-owned corporation. Since the development of infrastructural industries requires huge initial investment, involves long gestation period and yields very low initial return, private investors turn away from such investment projects. So it is in the rightness of things for the public sector to develop those industries in which private sector is unable and unwilling to put the resources required and undertake the risks involved. If private sector is given a free hand, industrialisation will lead to exploitation of consumers.

What are the Objectives of Public Enterprises?

Some industries are to be developed only in public sector like defense, nuclear energy and the like. Even if an enterprise is extremely beneficial for public in general, private businessmen will not venture in it unless they find it lucrative. State enterprises are essential for those lines where private sector is cautious to invest.

State enterprises are necessary for those lines where private sector is hesitant to invest. At the time of independence, public sector in India was confined mainly to railways, com­munications, defence production and public utility services. Since then the growth of public enterprises has been very rapid. The public sector has been playing a vital role in the economic development of the country.

The Public Accounts Ordinance of 1957 was enacted (no.37 of 1957). The Public Accounts Rules were issued the same year as this statute, allowing for the creation of rules relating to public accounts. They mostly dealt with accounting audits, but there was a portion that listed the accounts and statements that the Accountant-General would be auditing. The goal is to show that government resources have been approved and handled appropriately by ensuring that government funds are applied honestly, following right procedures, and staying within budgeted levels and legal restrictions.

However, in private sector accounting, the proprietary approach is adopted. In Public Sector Accounting, current assets such as stocks and debtors are not shown in the balance sheet. Debtors and creditors are not reckoned with until money is received or paid. The current assets and current liabilities are shown in private sector accounting system. The departmental undertakings include those enterprises whose management is done by a department of the government itself.