THE ROLE OF PUBLIC ENTERPRISE IN ECONOMIC DEVELOPMENT OF NIGERIA (A CASE STUDY OF ANAMBRA BROADCASTING SERVICE (ABS) AWKA)

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 INTRODUCTION

Public enterprises were introduced in most countries to elevate economic development. Yet increasing evidence indicates that most public enterprises either do not contribute strongly to social and economic development or perform their public service functions ineffectively or inefficiently. Policy makers engage in continuing debates over whether or not state-owned corporations contribute to economic and social development, why so many have failed to deliver effectively the services for which they were created, and how their management can be improved. These issues will become more crucial as governments in developing and emerging market countries consider how best to achieve economic and social development in an age of globalization, how to spread more widely the benefits and mitigate the potential negative impacts of international economic interaction, and how to alleviate poverty so that larger numbers of people can participate effectively in productive activities and gain access to social services essential for human development.Over the past 50 years governments around the world established large numbers of public enterprises to accomplish development objectives, among the most important of which were to provide services and infrastructure that could not easily be extended by conventional departments and agencies of the State or by a weak or fledgling private sector. In many countries, however, state-owned enterprises took on a life of their own. Many pursued their objectives independently of government development policy or failed to perform efficiently and effectively functions for which they were created. In other countries political intervention and strenuous government control inhibited public enterprises from fulfilling their intended missions. Although public enterprises in somecountries are managed effectively and do provide services that are needed for development, too many merely became another bureaucracy plagued by inefficiency, ineffectiveness, corruption, and incompetence, draining resources from the public treasury. Recognizing their ineffectiveness, governments have been restructuring or liquidating public enterprises since the early 1980s. Many state-owned enterprises have been commercialized, corporatized, or privatized. Some governments require them to compete with private providers, forge partnerships with private businesses and nongovernment organizations, or outsource functions to the private sector. Although many enterprises remain in public ownership, their rationale, purposes, and effectiveness continue to be questioned. Governments seeking to meet the Millennium Development Goals (MDGs) should be asking if there is still a justification for public enterprises in countries where the private sector has grown stronger, where market economies are established or emerging, and where development depends at least in part on providing services and infrastructure to larger numbers of people.

in many developing countries, state-owned enterprises have lost their efficacy as instruments for economic and social development for a variety of reasons: because governments never infused them with strong developmental missions or because they used them for purposes that were not directly related to economic and social development, or because the inherent limitations of state ownership render public enterprises ineffective. I will also argue that the primary justification for continued public ownership and operation of service-providing enterprises is that they efficiently achieve development objectives (using the Millennium Development Goals or othermeasures of economic and social progress) that are not and cannot be achieved more effectively by the private sector or by non-government organizations.

Public enterprises face continuing risks of political interference, of cronyism and corruption in their governance and operation, and of an inability to generate adequate financial returns to either cover their costs or return a surplus to the government, all of which can divert them from fulfilling development objectives. In an era of increasing globalization, emerging markets, and expanding private sectors, governments must have a clear strategy for deciding which enterprises remain in public ownership and how they will contribute to achieving social and economic development.

2.2 CONCEPTUAL ANALYSIS ON PUBLIC ENTERPRISE

The concept of public enterprises has been subjected to a variety of interpretations and definitions to the extent that the concept lacks a unanimous or consensual meaning among various scholars and researchers (Laleye ,2008;Nnamdi and Nkwede, 2014; World Bank, 2000)). The inability to have a single standard definition of public enterprises can be attributed to the fact that public enterprises were established at different periods, and each epoch naturally brought forth the types of public enterprises most clearly matching its own conditions. It is therefore believed that the variation in definition are informed by the ideological, values, interests, dispositions and circumstances that brought public enterprises into existence (Adeyemo and Salami, 2008; Sosna ,2001). Nigeria’s public enterprises are generally corporate entities other than ministerial departments, which derive their existence from special statutoryinstruments; and engage in business type of activities to provide goods and services for the overall social and economic upliftment of the citizen. These include corporation, authorities, boards, companies and enterprises so owned and operated . in this paper, the researcher adopts the World Bank(2000) view that public enterprises are government-owned or controlled commercial entities that generate all or most of their revenues from the sale of goods and services.therefore a public enterprise is an organization that is set up as a corporate body and as part of the governmental apparatus for entrepreneurial or entrepreneur-like objectives (Ademolekun ,2002), The non-performance of the public enterprise has prompted series of discussions and policy recommendations on how best to move them out of their present quagmire. It was for these reasons that in 1999, the Democratic regime under the leadership of presidentOlusegunObasanjo, initiated sweeping reforms across the various sectors of the Nigerian economy. Where they recognized that national public enterprises have failed to meet public expectation, they were conceived to be consuming a large proportion of national resources without discharging the responsibilities thrust upon them. It was also established that they create economic inefficiencies,incur huge financial losses, and absorb disproportionate share of credit especially in the form of foreign loans (Oluade,2007).This assertion of declining performance and failure to meet their set objectives for which they were established lends credence to former President of Nigeria’s remarks on the occasion of the inauguration of the National Council on privatization on Tuesday July, 20 1999. President Obasanjo observed that successive Nigerian Government have invested up to 800 billion Naira on public owned enterprises. Annual returns on this huge investment have been well below ten percent. These inefficiencies and in many cases, huge losses are charged against the public treasury (Omoleke, Salawu and Hassan,2011).

2.3 DEVELOPMENT OF PUBLIC ENTERPRISE

Development economists all over the world are inagreement with the role of government in the social and economic development process of every nation.“The existence of a state and a government asinstruments of social organization is an established fact. What varies from state to state is the size and role of the government and, therefore, the division between it and the Private economic agents in the relative share of thecommand over resources" Okigbo (1979). Public corporationsin their various forms therefore allows government to play its instrumental role for national development.

Fubara (1990), described public enterprises asinstruments of national policy for economic development.For Ademolokun (1983), "Public enterprise 'emerged as aresult of government acting on the capacity, of anentrepreneur" Governments acquire business interest throughpalatalization strategy, nationalization of existing-.private entities and the establishment of fresh productive entities or joint venture schemes so as to learn certain managerial andproductive skills from foreign partners.

Developing countries relied more on State Owned Enterprises (SOEs) than industrialized economies did in the hope that they would balance or replace a weak or ideologically unacceptable private sector; would invest more and also produce a capital surplus to finance investment; and would transfer technology to strategic firms in mining, telecommunications transport and heavy industry. Kikeri et al, (1994). "Bythe early 1980sSOEs accounted on Average for 17% of GDP in Sub-Saharan Africa and a much modest 3% in Asia (this excludes China, India and Myanmar). Nellis (1986); "compared with 10% of GDP in mixed economies worldwide" Short (1984). In Eastern Europe and Central Asia, SOEs uniformly accounted for the bulk as high as 90% of all productive activities.

Supporting government big role in business, Sullivan, J. Wrote: "It has often been said that the government should get out of the way and let the market function. That idea is a myth. Government isabsolutely essential in setting up the framework of a market economy; without rules and structure of a binding nature, anarchy results. Under such conditions, business becomes nothing but 'Casino Capitalism' where investments are simply bets" (see Business Times, April 16 - 22, 2001) p. 13.

For Friedman (1971) public enterprises flourished due to the following reasons.

1. They provide a nucleus for the economic expansion of the nation and offer the advantages of large scale operation, without the disadvantage of private monopoly. 2. Some enterprises which are necessary and vital to the nation may not be attractive to the private sector and are therefore necessarily undertaken by the state. For example, rail transport in the vast and under populated regions of Australia and Canada. 3. Where there is shortage of private venture capital, the state often establishes public enterprise to undertake business that requires heavy capital investment.

Economic and defense policy have also been adduced as reasons for government participation in business. In Britain, whole business sub-sectors have been nationalized by the establishment of public firms. The government has explained that the control of an entire industry by them rather than fragmented private ownership would lead to a rationalization of activities within the industry and a lot more intensive programme of investment. Dainith (1974).

According to Okigbo (1982) government expenditure (in Public enterprise) may constitute a very significant large share of the markets... it is in this sense that an economy can be 'engineered', i.e. guided in its path by the intervention of public authorities, either directly in the markets or by their policies.

Strictly on fiscal grounds, Italy has reserved to itself such monopolies as tobacco, salt and quinine. Municipalities were also granted monopoly rights in some important local fields as transportation, gas, water, electricity, and milk supply. Treves (1974),

In France, Drago (1974), wrote that“public enterprises may be established as Enterprise Pilotes to be leaders in their industrial setting in terms of efficiency, technology, industrial relations and so on”.

Kiliick (1987), has identified the factors responsible for the existence and spread of public enterprise in various countries as ideological, political, developmental, employment creation, consumer protection, and the need to improve the distribution of national income.

Enterprises such as the United Kingdom Post Office, British Airports Authority and Atomic Energy Authority have been managed under public ownership for security reasons. The government of Britain had to acquire for diplomatic reasons the Aero Engine and other relevant function of Roils Royce in 1971 which was important to her national defense and collaborative programmes with other countries and too many air forces and civil airlines all over the world. Dainith (1974).

Unlike private enterprises which are incorporated under the Companies and Allied Matters Act, public enterprise are established through statutory enactments. “The adaptability of public enterprises in response to social .demands is a widely recognized attribute”. Friedman (1974). This meansthat they exist primarily to serve the needs of the populace either through revenue generation to government or ensuring ready availability of goods and services.Public enterprises according to Orojo (1992), are set-up by the government' for the purpose of its participation in theeconomic activities of the country. While some of the statutory corporations are essentially for social services... others are largely commercial, operating generally like private corporations.

2.4 THE CONSTRAINTS OF SAMLL AND MEDIUM SCALE ENTERPRISES

Looking at the economic history of industrial countries points to the obvious fact that surest to an industrial revolution is through small and medium scale enterprise. We have also come to know the obvious importance of SMEs and their contributions to the national economy. Experience has shown that when given proper attention SMEs contributed to the national development unfortunately, despite the importance of small and medium scale enterprise in the economy of the nation, the sector is still having some constraints. Following these constraints therefore, many eminent and ordinary people writing on this issue have been quoted in various circumstances concerning these constraints and their corresponding solutions.

LACK OF FUND:One of the main constraints is lack of fund, writing on this Moh, (1991) stated that; “there is hardly anydoubt that the core of the constraints in the business sector is one with a financial coloration. Most of the sector problems in the areas of production, marketing and indeed general management can be resolved by a financial solution. Therefore, capital is critical for the efficient organization of all productive activities. He continued that although various institutions that are presumably supposed to provide credit to the small business sector exist such as the bank, ministry of industries loan scheme, World Bank small business loan, NBCI etc, their impact has remained largely minimal. Unlike large enterprise, lending to small business is thought to be inherently a more risky understanding principally due to the following:

a. lack of Adequate Data Base and Track Record

b. Insufficient collateral c. Relative high cost of administering and monitoring small loan portfolios.d. High rate of default. In practice, it would appear that banks prefer to pay stipulated fines rather than comply with Central bank of Nigeria provisions. Indeed access to loans SMES is really difficult especially in these days. In support of the above view, Ovuorie (1995:9) in his article “coping with small size business” noted that: “small scale businesses in Nigeria have very little or no access to loanable funds. Lending institutions conspicuously; everybody wants to do business with millionaire. It is not surprising therefore that SMES operators end up in the ugly trap under investment. This leads to very low returns on capita which in turn leads to the premature death of the business. Writing on the same view Jarret, 91977:322) in this book noted that: “the dilemma of the less developed countries is that it can provide only very limited capitalincome of its people is so low, since this is the case, there is a corresponding limitation upon capital investment and this in turn means that productivity and therefore income remains low” This is main reason why for so long par countries have remained poor, they are in the grip of economic situation which is very difficult indeed to change. Writing on the same view Callaway (1975:31) a study of 225 businesses in Ibadan observed that, the majority of the entrepreneurs mentioned capital shortages as the greatest obstacle to their business expansion. In his contribution, Shanon, (1977:255) in book under-developed Area” a book of reading and reach stated that: “The business man’s lack of capital makes him dependent on his supplier for credit; and upon his customers, and his financier is oneperson, his position deteriorates to one compete dependence” Uzowulu, (1987:8), mentioned difficulties in obtaining local and foreign finance for the big projects as one of the major problems of SMEs. Marsha (1986:35) in his articles “self-Reliance and small enterprises” stated that “the problem of finances is characteristics of small scale industries in both the developed and the developing countries. Indeed virtually all the other problems confronting small scale industries emanate from lack of finance. “Dr. Masha also observed that small scale enterprise often lack knowledge of the right sources of finance for investment and working capital. In addition, institutional sources of funds are often unwilling to provide facilities for these enterprises. This made the SMEs to fact the perennial problem of shortage of working capital which hinders their ability to produce efficiently. The result is that many SMEs have to depend on alternative sources of capital in the form of family savings or borrowing from middlemen and money lenders where interest rate, collaterals and terms of repayment are much more exacting than those of the normal banking institutions.

LACK OF INFRASTRUCTURAL FACILITIES:Inadequate provision of essential services such as telecommunication, access roads, electricity, watersupply constitutes one of the greatest constraints to SMEs development. Most SMEs resorts to private provisioning of these at great expense. A World Bank study (1989) estimated that cost accounted for 15-20 percent of the cost of establishing a manufacturing enterprise in Nigeria. Contemporary evidence has shown that the relative burden of the private provisioning of infrastructural facilities is such heavier on SMEs than on large scale enterprise.

HIGH RATE ENTERPRISE MORTALITY:The incidence of inadequate working capital, which constraints productive capacities of the SMEs as well as absence of succession plan in the event of the death of the proprietor, leads in many cases to frequently early demise of SMEs. Moreover, the persistence of unstable macroeconomic environment, arising mainly from fiscal policy excesses has other smothered many SMEs.

FINANCIAL INDISCIPLINE:Some SMEs proprietors deliberately divert loans obtained for project support to ostentatious, expenditure. Others refuse to pay back as and when due. The interest and the principal; because of political involvement and the misconceived notion of sharing the so called national cake.(Chibundu, 2006).

LACK OF EXPERIENCES AND TRAINING: Another serious problems is lack of experience and training. Many apparently successful business owners often neglect the need for experience and training. They rely on their skills and talent, completely ignoring the need for experience in accounting, personnel, advertising, budgeting, purchasing and other aspects of management. Again, many business failure results from situations where people go into business without previous experience, so farmers, civil servants, lorry drivers etc in the past entered into business because when they saw traders making money, they felt the business was very easy and profitable profession. They were doomed to fail because they never had thorough preparation before launching their business. Writing on lack of experience, Dennis etal (1976) stated that: 35 “The ultimate failure of business could be directly attributed to lack of experience in accounting, purchasing, advertising, budgeting, pricing and other aspects of management”. To support the above view, Onyemelukwe (1976:10) in his book titled “problems of industrial planning and management in Nigeria” stated that” it is well accepted that lack of necessary know how is the main cause of the slow rate of industrialization in Nigeria”.

2.5 CHALLENGES FACING PUBLIC ENTERPRISES

Few evidence here proves that the performance of public service in virtually all tiers of government in Nigeria has remained very dismal, hence the present state of underdevelopment. The dismal performance of public enterprises, like the former National Electric Power Authority (NEPA) and the Nigerian Telecommunication (NITEL) is very obvious in this regard. In Nigeria many public enterprises operate under a business environment which is unique and distinct from that of the private sector which are in the same line of business. The business environment of the public enterprise could be that of a monopoly or it could operate in a competitive environment. For instance, shortly after the privatization of the telecommunication sector NITEL/ MTEL operated alongside other GSM companies such as MTN, GLO and ECONET. Also state-owned banks such as National bank, Cooperative and Commerce Bank (CCB) etc operated alongside other privately owned banks before they went into liquidation. Some of the challenges facing public enterprises include political interference, poor management, political instability, controlby government poor attitude to work by staff, financial mismanagement and poor funding. Political interference:Emeh (2012) observed that public corporations have several problems which can affect the quality of their goods and services. In fact, most public corporations in Nigeria cannot compete effectively with private companies engaging in the same line of business. Political Interference: Public corporations are government companies and sometimes the government and important government officials make them do things that may not be in the overall interests of the corporation. For political reasons, they can force the corporation to employ persons that are not qualified for the job or embark on projects that are of no real value to the corporation. Sometimes, the government corporations are forced to donate money to the ruling party for elections and other purposes. Such interference in the affairs of the corporation by the government and politicians will necessarily affect the efficiency of the organization. Political interference in the affairs of public enterprises has ruined many public enterprises in Nigeria (Anyadike, 2013).

Political Instability: Instability in the political system occurs when the government of a state changes too frequently and unexpectedly. Every new government wants to appoint its own representatives to the boards of government corporations. These constant changes in the policymaking body of the corporation lead to inconsistent policies. Constant changes can also lead to delays in the completion of projects or unnecessary changes in projects already embarked upon. Some projects in which huge amounts of money have been spent are abandoned because the new board of directors does not approve of them.

Poor Management: This problem is closely related to the two problems mentioned above. Members of the board who make policies for the corporation are political appointees who may not have any exposure in the corporation’s area of operations. Again, the government can make its corporations employ management staff that is not properly qualified. These two factors can result in poor management. Government Controls: It is necessary for the government to exercise some control over its corporations but sometimes these controls are so oppressive that the corporations is rendered inactive. In order to compete effectively with private companies engaged in the same business, a government corporation should be allowed to operate under similar conditions. For instance, if the government, for political reasons, imposes price controls on its corporations and cannot control the prices of other companies engaged in the same business, then the government company cannot return as much profit as the private companies.

Over-Protection by Government: Some government corporations are like over-indulged children who cannot do anything for themselves. Most of them depend on the government for everything including the payment of staff salaries and the maintenance or replacement of equipment even though they were established to provide services to the public and to make profits. In private companies, the workers know that they have to make profits or the company will close down and they will become unemployed. For this reason, the workers work hard to improve on their goods and services. In public corporations the workers do not seem to care especially as they have secure tenure of office, regardless of the financial positions of the corporation. In fact the services of some public corporations are so bad that the public would have nothing to do with them if it had any choice. Thus, the practice whereby government gives grants to its companies on a regular basis makes the workers careless about the quality of work they offer to the corporation.

Poor attitude to Work: Many workers in the public sector see their work as government work. Government work, they unfortunately believe, require neither seriousness nor commitment. The result is that workers do not do their work at all or do it haphazardly, and the corporations consequently cannot effectively discharge their duties for which they were set up. According to Nwachukwu (2007), Nigerian employees characteristically have a very poor attitude to work. He asserts that the average employee is “not on seat” fifty percent of the time. Most employees see white-collar job as government work in which the employee receives his monthly salary regardless of his or her input in the organization. Such an attitude will certainly be a draw back to the attainment of organizational goals. Financial Mismanagement:Ugoo in (Anyadike, 2013) argues that some public enterprises whose establishments are hinged on regulatory philosophy have also not lived up to standard due to endemic corruption in these enterprises as officials collect bribes and truncate their primary reasons for establishment. Some government corporations are notorious for their mismanagement of funds. Money is sometimes embezzled outright. Officials also connive with contractors who are paid in full for work that is either not done or is improperly carried out. There have been cases where old and obsolete equipment and machinery have been bought at the price of new ones. This money could have been used for necessary development projects by the company or the government. In Nigeria, a combination of all these problems are manifested in the very poor services given by public corporations such as irregular and erratic power and water supply, late or non-delivery of mails, faulty telephone services and poor rail road and air transport services. Furthermore, inability of government corporations to discharge their duties effectively has contributed a great deal to the slow rate of social and economic development in the country. Poor funding: It has been observed that inadequate funding of PEs by government makes their operation difficult, if not impossible. As a result, they also determined the tariff structure, which would have been an avenue to raise more funds to improve their performance. Most Public Enterprises in Nigeria were set up with a low equity capital base; thus making it difficult even to get financial assistance from banks. Poor capitalization was an impediment to borrowing, thereby contributing to negative performance. In summary, the challenges facing public enterprises was buttressed by Agabi and Orokpo (2014) when they asserted that the performance of Nigerian enterprises were compromised in many instances leading to inefficient utilization of resources by public enterprises coupled with heavy dependent on the national treasury for financial operations and their activitiescharacterized by mismanagement of funds and operations, endemic corruption, misuse of monopoly power and bureaucratic suffocation from supervisory ministries and its inability to enhance the social and economic well-being of the people, which no doubt placed government under tremendous pressure to initiate various economic reforms, with privatization as one of such reform programmes as a panacea to public enterprises quagmire.

2.6 PRIVATIZATION/COMMERCIALIZATION PROGRAMME IN NIGERIA

The role of public sector and public owned enterprises in Nigeria's development process in post 1970 era has been well documented. As at then it was considered fashionable for the government to take hold of the commanding heights of the economy, propelled by the economic inflow of oil revenues to the Federal Government in the 1970s. Nigeria was in the forefront of establishing public owned enterprises to engage in the production and supply of a broad spectrum of goods and services spanning iron and steel, petroleum and petro-chemical products, fertilizer, motor vehicle, electricity, paper, cement, agricultural production and processing transport, mining, trading and banking and finance. If 30 these enterprises have functioned effectively over the years, the Nigerian economy would have joined the league of newly industrializing economies such as Korea, Taiwan, Hong Kong, Singapore, Malaysia, Thailand, Brazil, Indonesia and Mexico (Iwayeni, A. 2002 pi). However, in the post 1970 period, public investment in the over 1000 public owned enterprises in Nigeria conservatively estimated at N 800 billion had no significant impact on sustainable development. Adding other direct and indirect costs associated with the dismal operating performance of these enterprises and their poor-financial and economic return, the scale of the losses associated with public enterprises in Nigeria are staggering. Public enterprises driven by import substitution industrialization strategy constituted a major dung on the economic performance in the past three decades. Without much exaggeration, the high level of mismanagement, gross economic inefficiency evident in the poor returns on public investment, excessive politicization and high level of corruption in most public- owned enterprises have pauperized Nigerians. It has also served as a catalyst for economic retrogression and the associated sharp decline in living standards, persistent large scale unemployment and technological underdevelopment (Iwayeni, A., 2002.p2). President OlusegunObasanjo, in his speech stated that State enterprises suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency which monopoly engenders. Inevitably, these shortcomings take a heavy toll on the national economy. It must be stated that the problem associated with State owned enterprises and monopolies are not peculiar to Nigeria. It is true, however, that many developing countries have overcome the problems through a well-designed and single-minded 31 pursuit of Privatization and Commercialization programmes. The rationale is that these programmes permit governments to concentrate resources on their core functions and responsibilities, while enforcing the "rules of the game". This enable the markets can to be efficiently, with provision of adequate security and basic infrastructure, as well as ensuring access to key services like education, health and environmental protection (Eke, E.2001.p 17). The objective is to assist in restructuring the public sector in a manner that will affect a new synergy between a leaner and more efficient government and a revitalized, efficient and service oriented private sector. Up till recently, there have been many years of exhaustive deliberations by stakeholders on how to put Nigerian economy on the path of sustainable growth and development. There are over 1000 State-owned enterprises in Nigeria, many of these enterprises gulped billions of Naira without yielding much positive result in terms of customer’s satisfaction. It has been estimated that the nation may have lost about 800 million US dollars due to unreliable power supply of NEPA and another 400 US dollars through inadequate and inefficient fuel distribution. Right now, a consensus has emerged on the imperative of Privatization and Commercialization of State-owned enterprises (Adeseri, A.2001. p 16). Government defines guided Privatization as "a carefully planned and systematically implemented programme of government withdrawal from the control of business enterprises which can be more effectively and efficiently run by private sector operators". Competitive Privatization will be encouraged in order to stimulate new investment and give the consumer an opportunity for a choice. The import of this policy is that sectors previously closed to private sector participation, such as petroleum refining, are being removed from the negative list for private sector investment. With respect to existing public sector investment, Government's desire is to ensure effective and efficient management of the public enterprises so 32 that the nation can get maximum benefits from the resources so committed (WTO Press Release, 1998). At the moment, not all Nigerians are convinced of the wisdom of me selling off State assets or giving foreigners control of crucial utilities. "The Federal Government is headed on a [path] of unprecedented national calamity with the foreign, ownership of any part of NEPA, NITEL, the refineries or the railways," wrote commentator Ogbuagu, Ken. He further stated that there is an International Conspiracy whose aim is to grab the oriental nervous system of Nigeria, hence Africa. The sale of strategic national assets is absolutely wrong. Many people share the writer's concern that control of important public utilities by private companies -whose prime objective is profit -making will halt the spread of development to poor sectors of society, particularly the rural areas (Obadina, T. 1998 p4). All these notwithstanding, Privatization and Commercialization has been found to be a catalyst for economic development in most other countries where there has been transparency and commitment on the part of the government in carrying out the programme (Iwayemi, A., 2002.p3). In Nigeria, it has been seen that while economic activity may be | constrained by tight monetary policy, the impetus for economic growth will come from freeing the energy of the private sector through deregulation and Privatization. (IMF Website). Preparation for Privatization of public enterprises started some years ago, it has since progressed and very soon most public institutions like NEPA, NITEL, among others will be sold to Private individuals. (Ugwoke, F. 2002 .p2).

2.7 HOW PUBLIC ENTERPRISES LOST THEIR WAY AS INSTRUMENTS OF DEVELOPMENT

In both economically advanced and developing countries, governments created public enterprises as revenue-generating ventures, to support an import-substitution development strategy, or to provide services or infrastructure that were considered to be essential to national, regional, or local development. In reality, however, many governments created public enterprises for reasons that were only tangential to development or that ineffectively contributed to it. After the Second World War, governments in Europe and North America used public enterprises to develop economically lagging regions, to provide specialized services that were beyond the expertise or resources of traditional government agencies, or to protect industries that were considered essential to future economic growth. But a significant expansion of public enterprises also took place both in Western Europe and in the former Soviet Union and its satellite countries for political or ideological reasons. Many countries with socialist governments nationalized industrial and service enterprises and collectivized agriculture in order to centrally plan their economies and minimize or eliminate market influences. In the post-colonial period of the 1950s and 1960s, governments in Africa, Asia, and Latin America sought rapid economic growth through industrialization strategies that required heavy investment in physical infrastructure and production facilities. In many of the post-colonial developing countries the government expropriated foreign-owned companies and centralized control over natural resources, mining, mineral, and some manufacturing industries. And in their push to accelerate economic growth and 6 consolidate political control, governments in many developing countries created new public enterprises rather than looking to the private sector for investment. The number of public enterprises also grew rapidly because the private sector was often viewed with suspicion by both political leaders and the public, especially in countries where colonial regimes previously ruled, or where major industries were owned by foreign companies, or where commercial activities were dominated by foreign or ethnic minorities. By the late 1970s, however, the contribution of public enterprises to economic and social development came into question when military or authoritarian civilian governments in some Latin American countries nationalized nearly all major industries in order to consolidate their political power and control over the economy and sometimes to extract public resources for private gain. Moreover, the developmental orientation of public enterprises became more ambiguous as many African governments, pursuing the concept of "African Socialism," took control of agricultural and agribusiness sectors as well as mining and natural resources industries that they lacked the expertise or financial capacity to manage effectively. Nationalization of production and service enterprises increased the already growing number of public employees in many developing countries and the public wage bill grew rapidly. Although not all of the growth in government employment took place in public enterprises, SOEs were often convenient organizations for locating surplus labor and providing a wide array of social benefits for workers. Directorships and senior managerial positions in public enterprises were often viewed as political patronage positions for retired military and high level civil servants or for relatives and friends of powerful political leaders. In Eastern Europe, the former Soviet Union, and in many Asian countries public enterprises hired large numbers of redundant employees to reduce social disaffection and to build political support. In Eastern Europe and in China, governments imposed strong social burdens on state industrial enterprises to hire redundant labor and provide social services while at the same time allowing them to operate with soft budget constraints, leading to inefficiency, low levels of productivity, and financial losses. The developmental orientation of public enterprises was more seriously questioned with the growing economic and financial problems that accompanied worldwide recession in the late 1970s, the debt crises faced by many African and Latin American countries in its aftermath, the succession of politically conservative governments in North America and Europe during the 1980s, and the shift to market economies in Asia, Latin America, and Eastern Europe during the early 1990s, all of which focused attention on the failures of public enterprises to deliver services effectively, contribute financially to the national economy, or to promote social progress. These trends were reinforced in the 1980s and early 1990s by growing dissatisfaction with the way governments provided goods and services, especially to the poor; by political interference in the operation of public enterprises; by continuing charges of cronyism and corruption in some state-owned corporations; by the imposition of surplus employment requirements; and by their inefficient operation. By the end of the 1980s widespread criticism of the performance of both national government ministries and public enterprises in providing goods and services and of the rising costs and ineffectiveness of government control of economic activities in general led political leaders in both Western and developing countries to reconsider their efficacy. Their inefficiencies were seen clearly in their limited abilities to satisfy the rapidly growing needs for commercial and social services that were becoming crucial for economic growth and for widespread participation in a globalizing economy. The investment decisions of government agencies were constrained by special laws and by central government planning criteria and procedures; they rarely considered the needs of communities or the preferences of consumers. Almost everywhere, government-owned telephone and telecommunications companies, for example, were notoriously ineffective in meeting demand for services that had become crucial to the participation of both small and large enterprises’ in global trade and investment and for creating jobs that would help alleviate poverty and raise people’s standards of living. During the 1980s and early 1990s, the average waiting period for telephone installation in Indonesia was nearly 8 years, in the Philippines 7 years, and in the former Soviet Union and in Pakistan 10 years. Call completion rates were extremely low in many developing countries because of the inability of public enterprises to invest in even basic telecommunications equipment and switching capacity. Completion rates for trunk calls were as low as 12 per cent in Pakistan and for local calls as low as 31 per cent in Indonesia. Many of the state-owned telecommunications companies in developing countries lacked investment capital and financial resources for maintenance and line expansion, and were seriously over-staffed. The World Bank reports that stateowned telephone companies in developing countries had 50 to 100 employees per 1,000 telephone lines in service compared to 0.2 employees or fewer in the United States and Europe. The inability of public enterprises to deliver basic services extended to other sectors as well. In Nigeria, for example, state ownership and the monopoly position of the National Electric Power Authority, an organization plagued by corruption, inefficiency, and mismanagement (conditions that characterized many of Nigeria’s public enterprises) compounded rather than solved that country’s continuing energy service delivery problems. Doubts about their ability to contribute to development increased with growing evidence that many public enterprises were loss-makers rather than revenue generators. Studies by the World Bank indicate that by the beginning of the 1980s, public enterprises in developing countries accounted for one-quarter to one-half of all outstanding domestic debt and for a substantial portion of foreign borrowing.