Crown corporations privatization

Crown corporations are wholly state-owned firms which are structured like private companies. The government can own crown corporations entirely or partially owned by the public sector. They can be set up to serve a federal or a national interest or established to serve a provincial or regional interest in the case of a provincial/territorial corporation. In these cases crown corporations become instruments of public policy (Maitland, 7)

The reason behind the name “Crown Corporations” lies in the traditions of Canadian government which were monarchical (Balls 128). The sovereign powers of the Canadian government lie with the Monarchy; meaning that the legal and symbolic source of political authority in Canada is the Crown, that is the King or Queen (Johnson, 5)

Crown corporations, using Canada as an example are formed by an act of parliament or by articles of incorporation enshrined in the Canada Business Corporation Act. They are of two types, those that are wholly owned by the government known as parent Crown corporations and those that are wholly owned by other crown companies which are known as subsidiaries.  Each corporation has a minister who is accountable to that particular corporation in parliament. The board of directors is appointed by the minister with approval of the cabinet. The minister represents the government, and that is the only way the government can intervene in the management of any corporation (Stevens, 7)

Privatization of Crown Corporations

Crown corporations have been in existence in Canada for close to a century now. They have played a critical role in promoting the country’s identity and unity. Canadian Broadcasting Corporation and Canada Post Corporation are good examples (Allan 34).

Crown corporations raison d.être is to provide essential goods and services that are not in the economy. For example, in Canada, the Crown Corporation provides railway transport services, telecommunication services and many other more. Canadian National Railways established in 1918 was prompted because of the failure of several private lines (The Directorate, 13).

Crown corporations are also created to regulate sensitive industries which cannot be left in the hands of the private sector. This can be due to national security concerns. For example, Canada has a crown corporation that is responsible for managing the national nuclear energy research and development program (Stevens 31). This corporation is better known as Atomic Energy of Canada (Ashley and Reginald, 23)

Benefits from privatizing Crown Industries; focus on Maritime industry

The Public/Private Infrastructure Advisory Facility (PPIAF) which is an advisory body to the world bank facilitates privatization of infrastructural developments across the world. It has a report reform toolkit which provides guideline to management contemplating port reform through the inclusion of private sector participation. Objectives of the tool kit include improvement in management expertise, need for profitability improvement, and access to new technology through private investment in equipment.

Santos in Brazil is the biggest city in Brazil and is served by a big port which is close to major industries. Since privatization in 1993, both cargo movement and productivity has drastically increased over the years. Privatization of the port has led to improvement in management expertise and profitability of terminals (Prokopenko, 55). Management is the key to the success of a corporation. Well dedicated and trained managers can spearhead the corporation to success.

The USA ports are not functioning to their level best. This is because their ports are not privatized due to government management and ownership policy of ports in the country. As a result, ports in USA have weakly performed. In a survey by AAPA in 1990, 20 of the 60 ports were operating at a loss. This represents a 30 percent. The underperformance of these ports is an indication that government interference has negatively affected the performance of the ports. A proper remedy for the norm is for the government to transfer operation responsibilities to private sectors, that is privatization (Cheong et al. 34)

Privatization of ports also gives a chance for trade expansion, industrial development and also eases port congestion. Shashikumar (1998, p.47).In a case study of Vietnam, most privatized ports have improved the living and working standards of employees (Chang,et al.67). This was not the case for the privatization. Thousands of new jobs were created on realizing the benefits that accrue from privatization, Vietnam’s majority of industries have been privatized (Claessens and Simeon, 43).

The divestiture of the Kelang Container Terminal, a port in Malaysia has proven to be highly beneficial to the government and extended to the buyers, consumers and employees. Before its privatization, the annual average compound in terms of total return to fixed factors was 1.9 percent. That was from 1981-1986 but on privatization the rate shot 11.6 percent. That was from 1986-1990. Furthermore the cost of repair, maintenance and administration were more than reduced to half. This is according to the Worlds bank analysis and findings of 1992. The report further states that privatization of KTC led to the second largest net welfare improvement in Malaysia. This is after the privatization of the port in 1985 (Transp and Alfred, 37)

Privatization comes with better management and efficiency in ports. This idea is favored by Rui Santana Afonso who is the planning and development manager for the Maputo Development Company, a port company in Mozambique. He cites better management and technology as the secret behind their success. This is attributed to the fact that Maputo, after being privatized has gradually won customs from South Africa ports which are owned by the country (Culinnae and Dong, 23)

Arguably, from facts stated above, with examples from other ports in the world, privatization is the way to go for the realization of the benefits of the Crown Corporations. It will not be of value when the companies’ services are of poor quality, and the state does not realize profits from them.

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