Lecture Notes on Public vs Private Sector

Introduction

Focus: Distinction between public and private sectors (Section 1.2).
Assessment Objective: Level 2, likely to appear in examinations as format questions or essay responses.

Definition: Businesses owned and controlled by the government.
- May not be operated directly by government employees.
- Examples: Public schools, public hospitals, metro systems (e.g., Hong Kong, Singapore).
Features:
- Financing: From public funds (taxes, profits from public sector organizations).
- Purpose: Provide essential goods and services.
- Profit Motive: Weak; profits are typically reinvested to improve services.
- Stakeholders: Public are primary stakeholders.
Examples:
- Large corporations like Saudi Aramco.
- Metro systems that reinvest profits.

Definition: Businesses owned and controlled by private individuals or other businesses.
- Primary purpose is to generate profit for owners.
Features:
- Profit Expectation: Essential for business survival.
- Stakeholders: Owners are primary stakeholders who expect returns on investments.
- Minimal Government Involvement: Limited to regulations, subsidies, or as a customer.
Funding: Primarily from private funds.
- Government may be a customer or offer subsidies.
Examples:
- More prevalent than public sector businesses.
- Often perceived as more efficient than the public sector.

Clarification: Publicly traded does not mean public sector.
- Applies to private sector companies with shares listed on stock exchanges.
Implications: Shares can be freely bought and sold in the market.
Misconception: Publicly traded refers to private companies, not public organizations.

Investment: Through pension funds and sovereign wealth funds.
- Government may own stakes in private businesses.
Control: Companies remain private unless government has controlling stake (>51%).