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Government-owned corporation
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A government-owned corporation, state-owned enterprise or government business enterprise is a legal entity created by a government to undertake commercial or business activities on behalf of an owner government. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used inter-changeably. The defining characteristics are that they have a distinct legal form and they are established to operate in commercial affairs.
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Encyclopedia
A government-owned corporation, state-owned enterprise or government business enterprise is a legal entity created by a government to undertake commercial or business activities on behalf of an owner government. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used inter-changeably. The defining characteristics are that they have a distinct legal form and they are established to operate in commercial affairs. While they may also have public policy objectives, GOCs should be differentiated from other forms of government corporation or entity established to pursue purely non-financial objectives that have no need or goal of satisfying the shareholders with return on their investment through price increase or dividends.
GOCs can be fully owned or partially owned by Government. As a definitional issue, it is difficult to determine categorically what level of state ownership would qualify an entity to be considered as "state-owned", since governments can also own regular stock, without implying any special interference. As an example, the Chinese Investment Corporation agreed in 2007 to acquire a 9.9% interest in the global investment bank Morgan Stanley, but it is unlikely that this would qualify the latter as a government-owned corporation.
The term Government Linked Company (GLC) is sometimes used to refer to corporate entities that may be private or public (listed on a stock exchange) where an existing government owns a stake using a holding company. There are two main definitions of GLCs are dependent on the proportion of the corporate entity a government owns. One definition purports that a company is classified as a GLC if a government owns an effective controlling interest (>50%), while the second definition suggests that any corporate entity that has a government as a shareholder is a GLC.
A quasi-governmental organization, corporation, business, or agency is an entity that is treated by national laws and regulations to be under the guidance of the government, but also separate and autonomous from the government. While the entity may receive some revenue from charging customers for its services, these organizations are often partially or majorly funded by the government. They are usually considered highly important to smooth running of society, and are sometimes propped up with cash infusions in times of crisis to help surmount situations that would bankrupt a normal privately-owned business. They may also possess law-enforcement authority, usually related to their functions.
By region
Europe
In Western Europe there was a massive nationalization throughout the 1900s, especially after World War II to ensure Government control over natural monopolies and to some extent industry. Typical sectors included telecommunications, power, petroleum, railways, airports, airlines, public transport, health care, postal services and sometimes banks. Many large industrial corporations were also nationalized or created as Government corporations, including among many British Steel, Statoil and Irish Sugar. Starting in the late 1970s and accelerating through the 1980s and 1990s many of these corporations were privatized, though many still remain wholly or partially owned by the respective governments.
A state-run corporation needs to be distinguished from an ordinary limited liability corporation owned by the state. For example, in Finland, state-run corporations (liikelaitos) are governed by a separate act. Even though responsible for their own finances, they cannot be declared bankrupt; the state answers for the liabilities. Conversely, the state can directly fund unprofitable business. Stocks of the corporation are not sold and loans have to be government-approved, as they are government liabilities. In contrast, the state also owns controlling interest in ordinary limited liability corporations.
In Russia and some other post-Soviet states, unitary enterprises are commercial organizations that have no ownership rights to the assets they uses in their operations. This form is possible only for state and municipal enterprises, operating with state or municipal property, respectively. The owners of the property of a unitary enterprise have no responsibility for its operation and vice versa.
The assets of unitary enterprises belong to the Federal government, a Russian region, or a municipality. An unitary enterprise holds assets under the right of economic management (for both state and municipal unitary enterprises) or operative management (for state unitary enterprises only), and that such assets may not be distributed among the participants, nor otherwise divided. An unitary enterprise is independent in economic issues and obliged only to give its profits to the state. Unitary enterprises would have no right to set up subsidiaries, but, with the owner's consent, can open branches and representation offices.
An example of such an enterprise is Mashpriborintorg.
By contrast, a state Corporation is a non-profit organization which manages its assets as described in its charter. State Corporations are not obliged to submit to public authorities documents accounting for activities (except for a number of documents submitted to the Russian government) and, as a rule, are subordinate not to the government, but to the Russian president, and act to accomplish some important goal. Control of the Government is implemented on the basis of annual corporation, annual report on the audit opinion of accounting and financial reporting (accounting), as well as the conclusion of the auditing commission on the results of verification of financial (accounting) statements and other corporation documents. Any other federal government departments, organs of state power of subjects of the Russian Federation, the local governments have no right to interfere in the activities of the State corporation.
United States
The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors: agriculture, home finance and education. Congress created the first GSE in 1916 with the creation of the Farm Credit System; it initiated GSEs in the home finance segment of the economy with the creation of the Federal Home Loan Banks in 1932; and it targeted education when it chartered Sallie Mae in 1972 (although Congress allowed Sallie Mae to relinquish its government sponsorship and become a fully private institution via legislation in 1995). The residential mortgage borrowing segment is by far the largest of the borrowing segments in which the GSEs operate. Together, the three mortgage finance GSEs (Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks) have several trillion dollars of on-balance sheet assets.. The federal government possesses warrants which, if exercised, would allow them to take a 79.9% ownership share in the companies. The federal government has not currently exercised these warrants.
Other corporations owned by the federal government include the National Railroad Passenger Corporation (which does business as Amtrak), the Tennessee Valley Authority, the Corporation for Public Broadcasting and the United States Postal Service.
Many states have government owned businesses for operations as well (e.g. North Dakota Mill and Elevator or South Dakota Public Broadcasting). Generally speaking, a statute passed by a legislature specifically sets up a government owned company in order to undertake a specific public purpose with public funds or public property.
China(PRC)
In the People's Republic of China, since 1949, all business entities were created and owned by the government. From the later 1980s, the government began to reform the state-owned enterprise, esp from later 1990s to early 2000s, many mid-sized and small sized state-owned enterprises were privatized and went public. There are a number of different corporate forms which result in a mixture of public and private capital. In PRC terminology, a state-owned enterprise refers to a particular corporate form, which is increasingly being replaced by the listed company. State-owned enterprises are governed by the various government level and in the central government level is State-owned Assets Supervision and Administration Commission of the State Council.
China(ROC)
The founding father of the Republic of China, Sun Yat-sen, was heavily influenced by the economic ideas of Henry George, who believed that the rents extracted from natural monopolies or the usage of land belonged to the public. Dr. Sun argued for Georgism and emphasized the importance of a mixed economy, which he termed "The Principle of Minsheng" in his Three Principles of the People.
"The railroads, public utilities, canals, and forests should be nationalized, and all income from the land and mines should be in the hands of the State. With this money in hand, the State can therefore finance the social welfare programs."
Corporations such as CSBC Corporation, Taiwan are owned by the state in the Republic of China.
Commonwealth
In monarchical Commonwealth countries, particularly Canada, country-wide government corporations often use the style "Crown corporation." Equivalent terms include "state-owned enterprises" and "Crown entities" in New Zealand, and Government Business Enterprise (GBE) in Australia. Examples of Crown corporations include the CBC in Canada and Air Canada before it underwent privatisation. Cabinet ministers (Ministers of the Crown) often control the shares in such public corporations.
At the level of local government, territorial or other authorities may set up government corporations such as "Local Authority Trading Enterprises" (LATEs). Many local authorities establish services such as water supply as separate corporations or as a business unit of the authority.
India
In India, public sector undertaking (PSU) is a term used for a government-owned corporation (company in the public sector). The term is used to refer to companies in which the government (either the Union Government or state or territorial governments, or both) owned a majority (51 percent or more) of the company equity.
Japan
In Japan, Japan Post was reorganized into Japan Post Group in 2007 as a material step of the postal privatization. It is currently wholly owned by the government, but is planned to be sold into private ownership. Japan Railways Group (JR), Nippon Telegraph and Telephone (NTT) and Japan Tobacco (JT) were formerly owned by the government.
OPEC
In most OPEC countries, the governments prefer to own the oil companies operating on their soil. A notable example is the Saudi national oil company, Saudi Aramco, which the Saudi government bought in 1988 and changed its name from Arabian American Oil Company to Saudi Arabian Oil Company. The Saudi government also owns and operates Saudi Arabian Airlines, and owns 70% of SABIC, as well as many other companies. They are, however, being privatized gradually.
Uruguay
Uruguay had the first welfare state of Latin America under the presidency of José Batlle y Ordoñez in 1904. Government-owned corporations monopolize services such as electricity (UTE), land-line communications (Antel) and water (OSE). Antel competes with private corporations in the cell-phone lines and international telephony markets.
In 1992, under the presidency of Luis Alberto Lacalle, the government attempted to privatize all its companies, following the neoliberal Washington Consensus. However, a referendum won by 75% of the population kept the companies in the hands of the government. By the end of his term, president Lacalle alleged that he had achieved a successful modernisation of the companies, which had made them more efficient.
See also
Further reading
Shadow Government: The Hidden World of Public Authorities by Donald Axelrod
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