A government-owned corporation, state-owned enterprise, state enterprise, government business enterprise, or parastatal is a legal entity created by a government to undertake commercial activities on behalf of an owner government. Their legal status varies from being a part of government into stock companies with a state as a regular stockholder. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used interchangeably. 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 agencies or state entities 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.
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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. Government-owned or state-run enterprises are often the result of corporatization, a process in which government agencies and departments are re-organized as semi-autonomous corporate entities, sometimes with partial shares listed on stock exchanges.
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 (parastatal) 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.
In most OPEC countries, the governments 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.
An increasing number of corporations are taking additional steps to protect their reputation and reducing exposure by identifying government-owned companies in an effort to identify easily overlooked government officials. Dow Jones has identified over 100,000 government-owned or controlled corporations in its Anti-Corruption service. Ths number far exceeds earlier estimates by the OECD.
In Australia and New Zealand, terms used for government-owned companies include: "state-owned enterprises" and "crown entities", in New Zealand and government business enterprise (GBE), in Australia.
In Australia, 4 prominent Government-Owned Corporations are:
These 4 corporations are apart of the Department of Communications, Broadband and the Digital Economy and currently report to Senator Stephen Conroy.
Former Government-Owned Corporations include Telstra, established in the 1970's as Telecom Australia. This company is Australia's No. 1 Telecommunications company in the IT and Telecommunications industry in Australia, and was privatised in 1997 by former Prime Minister of Australia, John Howard. Until June 2010 Telstra owned a majority of the copper wire infrastructure in Australia (the rest owned by Optus and sold it to its former parent, the Australian Government for $11 Billion AUD, as ducts in the copper wire tunnels are needed to install the Fibre Optic cable.
Local government councils and similar authorities also set up government corporations, such as water supply companies and "local-authority trading enterprises" (LATEs) (New Zealand), as separate corporations or business unit of the councils concerned.
In Canada, government corporations often use the style "crown corporation", indicating that an organization is owned by the executive branch of the government, which derives its authority from the sovereign. Examples of crown corporations include the Canadian Broadcasting Corporation, and Air Canada before it underwent privatisation. Cabinet ministers (Ministers of the Crown) often control the shares in such public corporations.
Crown Corporations also exist at the provincial level in Canada. The government of Saskatchewan has maintained the largest number of crown corporations including SaskEnergy, SaskPower, SaskTel, SaskWater, and Saskatchewan Government Insurance.
Privatization, or the selling of crown corporations to private interests, is very common throughout Canada. Petro-Canada, Canadian National Railway, and Air Canada are examples of former federal crown corporations that have been privatized. At the provincial level, privatized former crown corporations include Alberta Government Telephones and BCTel (which merged to become Telus) which still provides all telecommunications services in the two provinces but offers mobile phone services nationally; and Potash Corporation of Saskatchewan which retained its name and has become the world's largest producer of potash.
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 privatization. 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.
After 1949, all business entities in China were created and owned by the government. In the late 1980s, the government began to reform the state-owned enterprise, and during the 1990s and 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 both local governments and, in the central government, the national State-owned Assets Supervision and Administration Commission.
In Western Europe there was a massive nationalization throughout the 20th century, 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 enterprise needs to be distinguished from an ordinary limited liability corporation owned by the state. For example, in Finland, state-run enterprises (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. 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. A state-run enterprise is technically not always a corporation, it might also be a separate state entity, or simply a governmental agency acting as an enterprise, perhaps having its own budget. Conversely, the state can directly fund unprofitable business, such as railway services to remote areas.
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. A 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. A 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 (Russian: Государственная корпорация) 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.
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.They are mainly in the sectors of defence and power.These include:
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.
The economy of Singapore is dominated by government-linked corporations that produce as much as 60% of the country's GDP.[1] These government-linked companies are owned by a government holding agency, Temasek Holdings. Notable Government-linked corporations include Singapore Airlines, SingTel, ST Engineering, MediaCorp and Singapore Temasek Holdings.
In South Africa "the Department of Public Enterprises is the shareholder representative of the South African Government with oversight responsibility for state-owned enterprises in key sectors, including: Defence, Energy, Forestry, ICT, Mining and Transport". The current (March 2010) Minister of Public Enterprises is Barbara Hogan.[2]
The corporate entities that this department is responsible for are:
Other corporate entities not under the Department of Public Enterprises include the South African Post Office and the South African Broadcasting Corporation.
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."[3]
Corporations such as CSBC Corporation, Taiwan, CPC Corporation, Taiwan and Aerospace Industrial Development Corporation are owned by the state in the Republic of China.
The government-sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. The United States GSEs are private corporations owned by their stockholders, rather than government-owned corporations. Their primary function is to generate profits for their stockholders, but they are structured and regulated by the US government to enhance the availability and reduce the cost of credit to 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. Government sponsored enterprises include:
The Federal Government chartered and owned corporations are a separate set of corporations enchartered and owned by the Federal Government, which operate to provide public services, but unlike the federal agencies (Environmental Protection Agency, Bureau of Indian Affairs), or the federal independent commissions (e.g. the Federal Communications Commission, the Nuclear Regulatory Commission, etc.), they have a separate legal personality from the Federal Government, providing the highest level of political independence. They sometimes receive Federal budgetary appropriations, but some also have independent sources of revenue. These include:
The Federal Government acquired corporations are a separate set of corporations that were not chartered or created by the Federal Government, but the Federal Government has come into possession of and operates. These fall into two categories: incidental government corporations, those corporations temporarily in possession of the Government as a result of a seizure of property of a debtor to the Government, such as a delinquent taxpayer, usually these are awaiting auction, and most are too small to note, and government-acquired corporations, which are corporations whose stock or assets have been purchased by the Federal Government, as a result of the corporation being adjudged too big to fail, or, in other words, that their liquidation would present too much of a systemic risk to the total economy of the United States to allow the corporation to be liquidated, bankrupted, or otherwise wound up. These include:
There exists a second level of sovereign government in the United States after the Federal Government, those of the several States of the US, who compose the United States. State governments are bodies sovereign, like the Federal Government, and other sovereigns; they have sovereign existence deriving from the consent of the sovereign people of their territories who created them and wrote their State Constitution; they are not bodies corporate, as they are not created by the acquis of the Federal Government and exist with or without that Government's consent. As sovereigns, they have the power to hold radical title to land, to exercise the four fundamental powers, taxation, eminent domain, police power, and escheat, as well as numerous other powers, including the power to grant charters, and implicit in that power to charter is the power to charter corporations, which they do, extensively. The very vast majority of non-governmental corporations in the United States are chartered by the States of the US, and not the Federal Government, this includes most charitable corporations (though some charities of national repute are chartered by the Federal Government, and not by a State government), non-profit corporations, and for-profit corporations. States, as sovereigns, also have the power to charter corporations that they own, control, or are responsible for the regulation and finance of. These include municipal corporations and State chartered and owned corporations. Municipal corporations are public corporations that have devolved, democratic control over local matters within a geographic region; they are often styled villages, towns, townships, cities, or counties. Though these municipal corporations are often regulated and sometimes financed by the State government, and often can collect taxes, they are arms-length, non-sovereign, devolved public entities, and a State government which charters them is not legally responsible for their debts in the event of a municipal bankruptcy. State government chartered and owned corporations are numerous and provide public services. Examples include North Dakota Mill and Elevator or South Dakota Public Broadcasting. Generally speaking, a statute passed by a state legislature specifically sets up a government-owned company in order to undertake a specific public purpose with public funds or public property. Lotteries in the United States are also run by government corporations, such as the Georgia Lottery Corporation and many others.
There exists a third level of sovereign government in the United States as well, the sovereignty of the Native American tribal government. Native American tribes are comprehended as ancient sovereigns, established by their sovereign people since time immemorial, and recognized as sovereign by the Federal Government of the United States as well as the several States, and as such, the Native American (and Alaska Native) tribal government has rights appertaining to sovereigns, including the power to hold radical title to land, to exercise the four fundamental powers, taxation, eminent domain, police power, and escheat, as well as other powers, for instance, the power to charter corporations and undertake public undertakings that might benefit their tribal citizens, Native Americans and Alaska Natives also being citizens of their respective U.S. state, and also citizens of the United States. The Alaska Natives are particularly advanced in using their tribal sovereignty to incorporate corporations that are owned by and for the benefit of their tribal citizens and often compete in highly competitive economic sectors through the Alaska Native Regional Corporations. The Native American tribes in the Lower 48 states often use their sovereignty and their ability to charter to compete using regulatory easements; for instance, Native American tribal corporations often trade in goods that are highly taxed in surrounding states (such as tobacco), or engage in activities that surrounding states have (for reasons of public policy) forbidden, such as the operation of casinos or gaming establishments. Most of these endeavors have proven very successful for Native American tribal sovereigns and their tribal corporations, bringing wealth into the hands of Native Americans.
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.
| Postal | Railways | Pharmacy | Gambling | Alcohol retail | Health care | Universities | Telephone | Television | Oil | Energy | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Canada | yes (Canada Post) | no | no | varies by province | varies by province (LCBO, SAQ) | mix | no | no | yes (CBC) | mix | varies by province (Hydro-Québec, BC Hydro, Hydro One) |
| Finland | de facto (Itella) | de facto (VR) | no | yes (Veikkaus, RAY, Fintoto) |
yes (Alko) | mix (municipal) | yes | no | mix (YLE) | de facto (Neste) | mix (Fortum) |
| France | yes (La Poste) |
yes (SNCF) | no | mix (Française Des Jeux) |
no | mix | yes | mix (France Telecom) | mix (France Television) | no | mix (EDF) |
| Italy | yes (Poste italiane) | yes (FS) | no | no | no | mix (SSN) | mix | no | yes (RAI) | mix (Eni) | mix (Enel) |
| Great Britain | yes | no | no | no | no | mix (NHS) | mix | no | mix (BBC) | no | |
| Philippines | yes (PhilPost) | yes (PNR) | no | yes (PAGCOR) | no | no | no | no | yes (NBN) | mix (PNOC) | mix (NAPOCOR) |
| Sweden | yes | yes | yes (Apoteket) | yes | yes (Systembolaget) | mix | yes | no | mix (SVT) | no | |
| United States | yes (USPS, an agency) | yes (Amtrak) | no | no | varies by state (ABC store states) | mix | no | no | mix (PBS) | no | no |