REPUBLIC OF THE PHILIPPINES

PROVINCE OF NORTH COTABATO

MUNICIPALITY OF MAKILALA
MAKILALA INSTITUTE OF SCIENCE & TECHNOLOGY
CONCEPCION, MAKILALA, COTABATO

Program: Bachelor of Public Administration

Course
FREE ELECT – Public Enterprise
Number/Title:
Credit: 3 Week #: 14 (May 31 – June 4)
Instructor: Mr. John Martin P. Alvero

Contact Email: [email protected]

Information: Messenger: JOHN MARTIN P. ALVERO

General instruction: Read the content of the module carefully. This will help you
understand the topic for each module and will greatly help you answer the
exercises or activities at the end of each module. Each module is assigned within
a specific time period. You are expected to finish the module within the period
allotted. Should you have any queries and clarification regarding the module,
use the contact information available above. Kindly reach the instructor during
working hours from Monday to Friday. Do not forget to be courteous when
addressing your questions.

MODULE VII. COMPARISON OF PUBLIC AND

PRIVATE ENTERPRISES MANAGEMENT

Overview:
PUBLIC-PRIVATE ENTERPRISE
The coexistence of public and private enterprises is evident in countries that
adopt a "mixed economy" pattern with quite visible comparative roles in the
national economy. Though mixed economy pattern involves policy questions,
which can be decided at the country level, the comparative roles of public and
private enterprises may be defined by law or public policy in some countries, while
in others may evolve out of convention. In addition, the two sectors are viewed
differently in various countries as competitors and collaborators. Whichever form
is the case, they coexist by maintaining meaningful relationships in various spheres
of operations. More significantly, public and private enterprises differ in many
respects such as in their respective purposes, structures, orientations, scopes,
responsibilities and so forth.

I. LEARNING OUTCOMES
At the end of this Chapter, you are expected to:
1. determine the similarities and difference of Public and Private
Enterprises;
2. examine the relationship and partnership of Public and Private
Enterprises.

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 II. TOPICS
Lesson 1: Similarities and Difference of Public and Private Enterprises
Lesson 2: Relationship and Partnership of Public and Private Enterprises.

III. REFERENCES

 Ali, Jamal, “Meaning, Characteristics and Rationales of Public Enterprises”, Jigliga University,
July 2016.

IV. COURSE CONTENT

The major feature of public enterprise that distinguishes it from a private firm is the
multidimensionality of its objectives. The objectives of public enterprises are
always complex and even conflicting as compared to private sector enterprises.
Criteria of performance are correspondingly more complex and less clear-cut in
the case of public enterprises. They have special responsibilities to the
government than the private ones. They are expected to set standards in all their
activities.

A far-reaching distinguishing characteristic of a public enterprise from that of a

private one is the managerial environment, in that a public enterprise is not a self-
contained decision-making entity. In a private enterprise, all management
decisions are taken internally within the firm by its own board of directors. Subject
to the state's laws and regulations in general terms, there is no authority outside
the firm to make decisions in the case of private enterprises. This is not the case in
the public enterprise. Critical management decisions, particularly those of a
strategic kind, are not within the competence of the enterprise, and rather are
taken at the government level. Whatever may be pronounced about the
"autonomy" of the enterprise, certain decisions will be taken, and by their very
nature, must be taken by the government in its capacity as the owner or
shareholder.

Public and private enterprises also vary in their investment considerations; i.e.
private entrepreneurs invest their funds in ventures only where there will be
maximum possible gains in terms of financial returns, while investment in the public
sector takes other considerations in addition to financial profitability. Hence, the
performance of private enterprises will be measured purely on financial returns,
while that of a public enterprise will include the achievement of social goals in
addition to their economic returns or profitability. Generally, public and private
enterprises differ at many points-vary in form and purposes, which can simply be
summarized in terms of the following factors:

A. THE POLITICAL ENVIRONMENT

Public enterprises are generally working with the intent of implementing political
decisions since their very establishment is the result of political decisions system.
Therefore, public enterprises operate within the general framework of the political
system and are much influenced by the system. Activities of public enterprises
take place against the background of public criticism-supposedly to balance
conflicting social interests. On the other hand, private industry is essentially guided

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by the principles of profit maximization and doesn't act as an arbitrator or
intermediary between conflicting social interests. Moreover, unlike public
enterprises, the private sector is not within the direct political seen or public
criticism in most of its affairs.

B. SOCIAL COSTS
Public administration decision-making varies from that of private business in that
where private business is primarily concerned with questions of financial
(economic) costs and benefits, public administration is intimately concerned with
the concepts of social costs and benefits in addition to those of a mere financial
nature.

C. PUBLIC INTEREST
The performance of public administration is often evaluated by its ability to
operate in a manner so as to maximize and integrate public interest, whereas
private business is evaluated on the basis of profit maximization. In other words,
although efficiency is axiom number one in the value scale of both public and
private enterprises, in private business it has to do with the minimization of cost
and maximization of profits, while in the context of public enterprises the aims are
more complex to include other concepts like public service, public
accountability, and social responsibility. Therefore, the multidimensionality of
objectives requires efficiency to be redefined in connection to public enterprises.

As far as similarities of the public and private enterprises are concerned, all of
them are controlled by their owners; i.e. the shareholders. Public enterprises do
have a natural similarity of characteristics with private enterprises in basic patterns
of operations, management techniques, and motives in their "enterprise
dimension". The principal governing authority of both public and private
enterprises is their board of directors. In both cases, it is the shareholders who
exercise the right of nominating or appointing board members.

TOPIC II. RELATIONSHIPS AND PARTNERSHIPS

The relationships and partnerships between public and private enterprises are
revealed in many ways, but the following aspects may hold interest of paramount
importance:

I. AS SUPPLIERS AND PURCHASERS OF INPUTS AND OF OUTPUTS

The outputs of one of these two sectors may be used as the inputs for the
production of the other and the vice versa. This transaction often takes place
both with intentional arrangements and in the normal market operation. In the
economic sense, these transactions are not different from those, which could exist
among public enterprises themselves.

II. PRIVATE ENTERPRISES AS COMPETITORS OF PUBLIC ENTERPRISES

In some developing countries the pattern of the mixed economy permits and
even encourages the entry of the private and public enterprises in the same field
of endeavor on a competitive basis.

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III. PUBLIC ENTERPRISES AS PROMOTERS OF SMALL-SCALE PRIVATE INDUSTRIES OR
ENTERPRISES
One of the frequently declared national objectives of developing countries is the
widening of the entrepreneurial base and the promotion of the small-scale. In
many countries large public enterprises act as catalysts for the development of
small-scale industries in the private sector. They provide small-scale private
enterprises with technical guidance and specifications, install quality control
systems, and development finance.

IV. OTHER FORMS OF COLLABORATIONS

There are various other relationships established between the public and private
enterprises such as consultancy, contracting/sub-contracting and joint ventures.