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Government Business Enterprise

Government business enterprises (GBEs) are hybrid organizations that have characteristics of both private companies and public organizations. GBEs primarily operate commercial activities in the private sector but are controlled by the government through ownership and board representation. While controlled by the government, GBEs have a separate legal existence from the government as quasi-independent entities. Governments establish GBEs to ensure the continuation of important services like utilities, railways, and mail that private enterprises may abandon if unprofitable or in natural monopoly markets.

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Brigitte Opiso
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594 views

Government Business Enterprise

Government business enterprises (GBEs) are hybrid organizations that have characteristics of both private companies and public organizations. GBEs primarily operate commercial activities in the private sector but are controlled by the government through ownership and board representation. While controlled by the government, GBEs have a separate legal existence from the government as quasi-independent entities. Governments establish GBEs to ensure the continuation of important services like utilities, railways, and mail that private enterprises may abandon if unprofitable or in natural monopoly markets.

Uploaded by

Brigitte Opiso
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Government Business Enterprise

Some services are viewed as necessary to society—we can't go without them! Utilities, postal
services, railing companies, these are things integral to our economy and lifestyles, and
sometimes they are so important that the government decides to be involved in their
management, yet they still run as a business.
A government business enterprise (or GBE) is a hybrid organization that has features of a
private company and a public organization:

 They act like private companies in that they seek to make a profit and compete against
other companies

 They act like a public organization in that they carry out government policies and non-
commercial services; think of the mail service, railways, etc.

The following are the big three characteristics that define a government business enterprise:

1. The company's primary purpose is in commercial activities in the private sector


2. The company is controlled by the government, and
3. The company has a separate legal existence from the government

Wait, if a government business enterprise is controlled by the government, how can it have a
separate legal existence? As we mentioned, GBEs are a hybrid. Think of the government as a
holding company over the private enterprise.

 Save

GBE Purposes
Governments will get involved in commercial enterprises for many reasons. Sometimes the
government doesn't feel like the private sector can deliver the required service (e.g., the mail or
railways). The government might want to fulfill a service obligation, knowing that private
enterprise might bail out as soon as profits drop.
Think of a smaller country like Singapore for example. Singapore Airlines has been incorporated
to provide air travel in and out the country. But what if profits fall and management decides to
fold the organization? If this is the only air carrier in the country, its void is hard to fill.
Therefore, a GBE can be created to ensure the continuation of the service.
Natural monopolies are another business entity that the government eyes for GBEs. These are
goods or services that don't necessarily benefit from competition. Think of gas or electric
companies. You wouldn't want ten different companies with wires to your house! In order to
continue the service without interruption, it may be necessary to create the GBE.
Government Control
There are two main control mechanisms that governments use for government business
enterprises: the presence of government officials on the board of directors and direct ownership.
In Australia, the government (Commonwealth) controls a government business enterprise when:

 It controls the makeup of the board of directors


 It can cast more than 1/2 of the votes at a general meeting, and
 It holds more than 1/2 of the GBE's company shares of stock

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