State-Owned Enterprises 3 replies

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masked_marsoe VIP Member

Heaven's gonna burn your eyes

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16th April 2005

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#1 10 years ago

State-owned enterprises (hereafter SOEs) are in general business owned by the government.

In the traditional sense they were government monopolies on key aspects of business (for example railways, postal service), that were likely to be subsidised and had the key function of providing a basic level of service. In modern times, they have changed to often be businesses that need to be competitive as well.

From a public policy perspective, they are useful because they exist in a unique position to provide public service with public input (as there will be a Minister or similar in charge, who will be subject to popular opinion). In NZ, SOEs tend to be the cheapest options (Meridian Energy is the cheapest power company, Kiwibank the cheapest bank, etc) but both companies are very profitable and popular.

At the same time, they can also reduce the tax burden by providing dividends (as profitable businesses do) back to the government, and can even be used as assets on the government books.

Thoughts? (Remember to think practicably as well as ideologically =p)


I chose an eternity of this

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6th January 2005

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#2 10 years ago

With many types of businesses it makes sense to have them state owned, and with some it is essential to provide adequate services affordable for all (education, transportation, drinking water, sewage etc.). The big advantage is that the state can more easily compensate for low profits with other sources of income, other businesses or taxes, making the system financially more balanced. Also, since a state owned business doesn't have profit as a primary objective, quality and prices tend to be better than private owned businesses. Particularly for the consumer, it's usually the preferable situation (talking about services in particular here, with industry and such it's a bit different).

Admiral Donutz VIP Member

Wanna go Double Dutch?

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9th December 2003

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#3 10 years ago

Not sure what I may add here, I pretty much agree. SOE's cna do a lot of good, offering a broad service and ensuring basic needs. This ensures that all people have equal acces to a service (for example: A small vilage still has a bus connection even though it's not proffitable at all, it's there to give people acces to public transport).

So in my opinion SOE's for the classic areas of transports, infrastructure, media (hardware that is, the studios must be independant so you don't have a puppet media!) is the way to go. I much miss the age of a decade or 1-2 ago before our goverment privitised a lot of assets (the railroads, post services etc.). The ideas behind this were nice (competition is introduced, should reduce prices and costs) but the negative effects of cutting unproffitable sections (service!) had been neglected. The goverment finally realized this and promised to bring a hold to further privatesation plans.

Ofcourse there is the cliche argument that SOE's just pump a lot of money around and have a lot of unnecessary costs (due to ensuring a certain level of service and decade long habbits) but overal the pro's outweight the cons. SOEs's might be more prone to wasting money (example: keeping a large bus driving the same line for decades even if passenger levels declined, instead of replacng it with a smaller bus) but with propper reviewing this can be reduced aswell so that both the level of service and quality remains god while the costs, price and burden on society (taxes) are acceptable aswell.

Particularly for the consumer, it's usually the preferable situation (talking about services in particular here, with industry and such it's a bit different).

Nothing comes for free though. So you probably pay for the service/price level in some way, the question is then if you mind that or not. Though in theory it should indeed all be cheaper since the SOE would be out for just making the most money.



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8th April 2005

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#4 10 years ago

State-owned enterprises might be necessary when it comes to strategic sectors like air & rail transportation, energy and arms production in order to maintain supply security of a nation and national independence.

Otherwise state-owned enterprises aren't needed as the private sector is indeed more efficient and cost-effective than the public sector, with few exceptions, due to more motivated & better paid management, more effective practices & financial incentives for staff, drive for profit and with less bureaucracy & oversight. Saying that the public sector is more effective than private sector because of the latter one doesn't look for profit simply isn't true: there are other reasons why the public sector might be more effective in few cases.

Tax burden can be reduced by collecting taxes from enterprises owned by private owners and an enterprise doesn't necessarily have to be state-owned to be regulated & supervised properly. However I see that media sector forms an exception here, it's good there's publicly owned broadcasting company to offer more objective & factual news and documentaries compared to commercial media.