The concept of the public sector refers to the part of the economic system that is controlled and financed directly by national or local governments through tax revenues. This sector provides many services to the government in most countries. This sector includes many services such as infrastructure, water management, and health care, in addition to For the security and defense services of countries, the private sector was limited to the armed forces, police, postal services, etc., but in the nineteenth century, Europeans dared to include other services in the public sector, including what was mentioned of health, education, and others, and this is the difference. The main difference between the public sector and the private sector is that the public sector does not seek to achieve profits as a primary objective for its operations, as is the case in the institutions affiliated with the private sector, and the term “public sector” is used for analytical purposes so that maps are created showing the scope and size of the state’s activities within the economy, which helps investors understand the economic situation of the country in which they will invest their money as a precaution.
What are the types of public sector institutions?
The public sector includes many institutions affiliated with governments so that they control, manage, and finance them to support them in carrying out activities and paying employees’ wages in addition to completing production operations in them. There are three main types of institutions in the public sector that can be identified through the following:
First: Administrative Commitments
Administrative undertakings are one of the oldest forms of public institutions, referred to as government administration, and the existence of these institutions depends on governments and ministries that control their work. This type of institution is represented in telecommunications services, mail in addition to transportation, etc., and governments are fully centralized and controlled. On the work of these institutions, where they have the right to access the revenue treasury, in addition, governments finance these administrative undertakings, and the good thing about this type of institution is the ease of their formation, and the accountability of these institutions is high as they are responsible by governments and discuss decisions related to them constantly have.
Second: Legal or statutory institutions
This type of institution refers to the types of public sector organizations that were formed through the procedures of the legislative authority or government legislative bodies in the country. In addition to their rights, examples include ministries of justice, institutions responsible for oil and natural gas, and so on.
Third: Government companies
This type of institution represents a type of institution in which governments own at least 51% of the paid-in shares, and this type of public sector institution follows the provisions that apply in other companies, as is the case in companies registered with an official record, and governments aim by controlling These institutions should not be allowed to control the market, carry out monopoly movements, and so on. In most cases, these institutions produce products or provide important and basic services to individuals in the state.
What are the characteristics of the public sector?
Based on the significant impact of the public sector on government decisions and the private economy of each country, which in turn is reflected in the lives of individuals, the characteristics of the sector in general have been analyzed to clarify the nature of the environment that is being dealt with, and through the following, the most prominent of these characteristics will be mentioned:
First: Government ownership
All institutions in the public sector are owned by state governments, and if not completely, they own at least 51% of the shares in those institutions, making them the controlling party permanently.
Second: Government administration and oversight
Where an independent body responsible for oversight has been developed that is managed and owned by governments. Governments control institutions by appointing key employees in them, such as board of directors, administrators, etc.; governments are the ones who manage appointments and transfer members to public sector institutions.
Third: Public Accountability
Public sector institutions are accountable to all people, and MPs and parliamentarians follow them to help deliver products and services to the public, which, in other words, means that government institutions are run by the government.
Fourth: Providing the service
Public sector institutions aim to provide services to the public by providing goods and services at the best prices compared to private sector institutions, but this does not mean that public sector institutions cannot achieve a symbolic profit.
Fifth: Independence
Governments can be considered directly responsible for financing, owning, and managing their affiliated institutions at the same time, but they do not interfere in the daily activities that they carry out so as not to affect the production process and the provision of services to individuals.
Sixth: Monopoly
where governments can be considered a monopoly of the public sector directly and clearly.
Seventh: Separate legal entity
The public sector was established as a legal unit that could buy and sell securities and shares, conclude agreements, and sue parties that might encounter problems in dealing with them.
Eighth: Stability
The public sector can be described as being generally stable and permanent in nature, in which job security can be guaranteed for its employees from the general public.
What are the pros and cons of the public sector?
The public sector is characterized by a set of positives and negatives that play an important role in the decision of many parties to move towards investments or privatization. The most prominent of these points can be clarified by the following:
What are the advantages of the public sector?
Many parties may hesitate to support or contribute to public sector institutions due to the extent of control and management carried out by the governments of countries, but they have many advantages, the most important of which are:
- Providing an economic measure and an indicator of the extent of production and growth.
- Ease and clarity of planning and coordination on the operations and activities carried out by institutions.
- Independent preparation without government interference in the day-to-day activities of the institution.
- Protecting the public interest of the people from widespread phenomena that may cause major problems that affect the structure and security of society.
- Decision-making is somewhat faster and more accurate than in the private sector.
- Raising funds through government sources and supporting and financing public institutions to ensure the continuity of their work in the state
Governments take advantage of the large size of public sector institutions in general in order to reduce prices and provide the best possible quality of the products and services they provide, and this is done by increasing productivity and trying to monopolize that for them to have the ability to fully control the market. Governments can influence the level of public welfare by taking measures to enhance this, and public institutions can support their activities through funding from private sources and not link this to government sources only for their great role on the whole of society.
What are the downsides of the public sector?
For every good aspect, there is another aspect that affects the reflection of the actions that public institutions carry out in an inappropriate manner and that leads to some control over the overall performance and productivity in the end. The most prominent negatives of the public sector can be clarified through the following:
- Facing difficulty in managing public institutions, and this may be related to the large volume of activities and operations that take place within them.
- There is a risk related to the production of ineffective products or the provision of services to the community that will affect the budgets of governments directly.
- The existence of a financial burden linked to the government that may be transferred to other governments in the event of a change in its structure.
- Political interference: a situation may arise from political activity related to the work of government or public institutions, which may lead to cases of public anger in all cases if the public’s demands do not comply with the political vision.
- It is possible that power in government institutions is used inappropriately, in addition to the possibility of corruption emerging among administrators who control the operations and internal activities of the institutions.
- Consumer interest can be neglected.
- Considering the cost of maintenance and operation of the activities and mechanisms of public institutions, it is rather high compared to the private sector.
It may be difficult to manage public institutions due to meetings that include meetings with many important and administrative bodies. While it is expected that the decision-making process will be fast, it will require more time to do so if a large number of employees are required to attend these meetings during their schedules. Accurate time work is required, and these institutions may be affected by external factors and produce some poor-quality products while their prices are exorbitant. By providing subsidies and support to them to cover these losses, and the greater the losses of government institutions, the greater the amount of money they need to cover the loss, which in turn may cause strain on government financial resources.
What is the importance of the public sector?
The public sector requires careful attention and monitoring by government officials, as the public sector refers to an important part of the economy of countries or the national economy, which reflects the image of the state in front of investors and those who provide support, is directly linked to public service programs, governments control it, and the sector affects The public sector plays a significant role in the lives of individuals and the society around them by contributing to the activity of the economy, which is reflected in the standard of living and income rates for individuals. Therefore, priority may be given to understanding what the public sector includes, in addition to following up on what it supervises and making sure of the decisions that are taken for its potential in playing a large and effective role in shaping the outputs of the economy and achieving economic development and growth.
Read also: What do you choose ? Tax evasion or Tax avoidance !
