Governance And Operations Of Public Enterprises

Because of natural monopoly, public utilities used to be run by the public sector in the western countries. However, with the evolution of natural monopoly industries and further development of government regulation theories, there has been a privatization drive in such western countries as the U.S. and Britain since 1970s. With government regulations eased and competitive mechanism introduced, Public utilities are industrialized and incorporated, separated from the public sector. All these measures have been playing a considerable part in cutting operation costs and improving efficiency in public utilities. And now, China is beginning to gear up with the rest of the world through embracing the privatization orientation.Progressing along with the deepened reform of state-owned assets and enterprises, the reform of Chinese utility enterprises has apparently been lopsided, which is manifested on one hand in the fact that the utilities reform is lagging far behind that of other competitive enterprises, and on the other hand in the lopsided reform development of various departments comprising public utilities. Ever since the foundation of the"socialist market economy mechanism"in 1990s, there has been a new round of institutional reform concerning the privatization of public utilities. The advent of 21st century and entry into WTO have brought on further market open-up and the acceleration of the private sector. As a result, what top the agenda of the government institutional reform are the facilitation of market-oriented reform of public utility enterprises, the resolution of the institutional confusion and crisis, and the promotion of the operation efficiency of public utility enterprises.From the perspective of utility enterprise governance and operation, this thesis begins with the introduction of such theories as natural monopoly, incentive regulation and co-operational governance models of enterprises in chapter 1. A comprehensive elaboration on the utility enterprise development before and after the transformation of Chinese economy follows in chapter 2, before the emphasis of this thesis is raised, i.e. the resolution of the four problems involved in the market-oriented reform of public utility enterprises. First, chapter 3 deals with the property problem. A multi-property structure is to be set up to accord with the competitive system. A regulation mechanism should be created to coordinate government regulation and market reform. Chapter 4 concerns the inflexible management mechanism. Based on the social nature of public utilities, relevant core interests should be allowed to partake so that a co-operated multi-interest balance can be realized. Chapter 5 discusses the insufficiency of internal impetus. The traditional cost-plus pricing does not encourage cost efficiency, and can not meet the requirements of market-oriented reform of public utilities. Therefore, incentive pricing should be introduced into various departments of public utilities, giving an impetus to internal operational efficiency. Chapter 6 elaborates on the outdated financing model. One of the effective approaches to cope with this problem is to promote ABS asset backed securitization, under which model the part of public utility assets which provides steady cash flow can be securitized to raise funds. The ABS enjoys merits superior to the BOT, and is highly feasible in China. Chapter 7, i.e. the last chapter of this thesis, winds up the discussion with a case analysis of the operational reform of public transport service in Shanghai.