State enterprises have grown substantially during the last three decades. Traditionally confined to public utilities, they now vary widely in the ways they are organized, and in their spheres of activity. Organized as corporations, companies, holding companies, boards, statutory authorities, special accounts, and autonomous agencies, their functions range from agricultural farms to highly sophisticated and high-risk ventures such as aerospace industries, and include the manufacturing of capital and consumer goods, mining and extractive activities, and trading and marketing. In many countries, strategic sectors such as energy, transportation, communications, and iron, steel, and coal production are completely operated by state-owned enterprises. Because of their diversity, state enterprises are hard to define, but they are generally owned and/or controlled by government and are usually autonomously organized—with the government providing the initial capital and being responsible for a continuous overview of their activities.
State-owned nonfinancial public enterprises (NPEs) (excluding such financial institutions as central banks and state-owned commercial banks) are now among the largest employers in a number of countries. NPEs now contribute about 40 per cent of gross domestic product in Bolivia, 25 per cent in Pakistan, and 16 per cent in India. In 1974, the share of these enterprises in the total invested capital in India was 45 per cent, 38 per cent in Iran, and 18 per cent in Sri Lanka.
The growth in the role of NPEs has been accompanied by an increasing concern about their financial performance, in part because many NPEs have tended to be less successful than expected. Their dependence on the government for subsidies and other forms of assistance contributed to deficits in the government budget and aggravated tendencies toward deficit financing. This phenomenon is common to both developed and developing countries and raises questions covering a wide range of structural, economic, financial, and managerial issues about the present and future role of enterprises. A recent study in the United Kingdom noted, for example, that there is “confusion” about the respective roles of government and enterprises and that the situation is “unsatisfactory and is in need of radical change.”