1. MEANING OF PUBLIC ENTERPRISES: DEFINITIONAL TESTS
Lecture Two
MEANING OF PUBLIC ENTERPRISES: DEFINITIONAL TESTS

2. Definition
Synonymous terms with public enterprises: public undertaking, public corporation, national enterprise, state-owned enterprise, governmental enterprise.

3. The Enterprise dimension of PE
Engaged in production of goods and services
Goods and services are marketed at a price
The revenues so earned are adequate to cover the costs
The activity is based on the entrepreneurial idea of investment and return
Keeping of books and accounts
Each of these elements are indispensable.

4. The public dimension of PE
There must be public ownership
The goal is the public/public purpose
Public controlled/state-controlled
Public accountability
Public management/optional

5. A governmental entity must meet the above two relatively broader requirements to be called a public enterprise.

6. Administrative Agencies Public Enterprises
Obtain money from the government every year in the form of budget
Entrusted to regulatory functions
Operated by strict, delayed rules and regulations
record and keep balance sheets, that shows its assets and liabilities at a given time of the budgetary year
Financial performance is evaluated by exterior body at the national level
Do not pay tax
Fund is expended as an initial capital for its establishment. Or given money as a subsidy to save from failure
Do profit-making activities
Ruled by flexible rules that enables to be competent
Has to keep balance sheet, profit and loss account that shows their financial status
financial status is evaluated at an individual enterprise level
As profit makers, they have to pay taxes

7. Public enterprises Private enterprises Established by statute
Apart from profit, they have multi-dimensional objectives, including “social responsibility”
Accountable to the public, greater in scope and degree
There is an external management control mechanism (the state or its regulatory institutions)
Monopolistic (when private sector refuses to engage in)
Established by contract
Profit makers. Recently a duty of “corporate social responsibility” is introduced.
Accountable to their members. Lower degree and scope of liability
Decisions are made at an enterprise level by an organ constituted at that very level
Not monopolistic

8. Public enterprises
Private enterprises
Immune from bankruptcy
Shares are not transferable
Sometimes exempted from taxes; lower operational cost (e.g. building rent)
Can be declared bankrupt
Shares are transferable (save as the requirements for transfer of shares)
No exemption of taxes (except exemption allowed under the investment law for certain activities and certain period of time)

9. THE PLACE AND FORM OF PUBLIC ENTERPRISES IN ETHIOPIA
A historical review; early enterprises
Bank of Ethiopia
Ethio-Djibouti Railway Enterprise
Imperial regime
Domestic private capital was almost absent
Thus, PE were established by the state or jointly with foreigners
There was no comprehensive law except few legislations governing few enterprises
Dergue regime
Adopted state ownership of means of production, nationalized private capital which have been developed earlier
The present regime
State actively participated in the economic activities. In addition, it invites the private sector to participate in the economy

10. The 1995 FDRE Constitution
It recognizes the right to property (Art. 40) and the right to take part in an economic activity a person is interested in (Art. 41).
It imposes a duty on the government to formulate and implement the country’s policies in respect of overall economic social and development matters (Art 51 (2)).
This duty is carried out, in part, by establishing public enterprises.

11. Proclamations Public Enterprises Proclamation No. 25/1992
It regulates public enterprises
It intends to regulate state enterprises that did not undergo ownership change and that have to stay under government control

12. 2. Privatization and Public Enterprises Supervising Authority Establishment Proclamation No.412/ Privatization Proclamation No. 146/ The Civil Code and the Commercial Code 5. Regulations

13. Types of PE in Ethiopia
Functionally, public enterprise may be broadly classified as financial institutions (insurance, banking), promotional and development undertakings, and commercial & industrial undertakings.
Different laws have tried to provide for types of PE in Ethiopia.
However, the basic types of PE are wholly state owned enterprises.

14. Question
How do you categorize enterprises which are established jointly by the government and a private person?