In an era where socioeconomic injustice drives impassioned calls for government intervention to reduce inequality, one powerful but often overlooked policy instrument deserves renewed attention: public sector enterprises or more commonly known as public sector undertakings. These state-owned institutions, embedded deeply in the economic fabric of several nations, have consistently delivered outcomes aligned with sustainable development—socially, economically, and environmentally.
Research has shown that public sector enterprises provide significant socioeconomic benefits to their employees, including higher wages, safer working conditions, and access to social security. Moreover, their operations are often mandated to align with environmental and social goals, particularly in countries like India, Malaysia, and Sweden, where corporate social responsibility is not just encouraged but required by law. In contrast, such CSR commitments remain largely voluntary in the private sector across most parts of the world.
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Why public sector undertakings
Beyond these employee-focused advantages, PSUs have historically played a critical role in safeguarding economic sovereignty, especially in postcolonial nations of the Global South. Unlike profit-driven private or foreign-owned firms, state-owned enterprises channel their revenues directly back into the public exchequer, empowering governments to reinvest in national priorities. This direct control over natural and industrial resources ensures that their exploitation serves national interests rather than enriching foreign corporations.
Take, for example, Bolivia. Under President Evo Morales, the country undertook an ambitious nationalisation of its hydrocarbon sector through Supreme Decree 28701. As a result, government revenues from this sector skyrocketed from $173 million in 2002 to $1.3 billion in 2006. Before this shift, foreign corporations extracted 82% of the sector’s profits, remitting just 18% to Bolivia. Despite a 1998 United Nations advisory urging companies to reinvest profits locally, this call has gone largely unheeded, especially in resource-rich but economically vulnerable nations.
PSEs also enable governments to ensure the responsible, regulated use of resources. Being directly accountable to democratically elected officials, these enterprises must operate within legal frameworks that govern extraction, environmental impact, and community welfare. Non-compliance typically triggers internal investigations and disciplinary measures. In India, for instance, central ministries closely monitor the functioning of PSEs in their respective sectors. By contrast, when Iraq’s oil industry was liberalised post-2003, multinational firms rapidly expanded extraction far beyond sustainable levels, prioritising profits over long-term national interest.
The risks of unregulated privatisation aren’t limited to extraction. Consider the case of Stockholm, where the privatisation of a publicly owned district heating company led to a 45% increase in service prices over a decade. This example highlights how market-driven motives can lead to price gouging and erode affordability for ordinary citizens.
This is not to idealise state-owned enterprises or overlook their shortcomings. Inefficiency, bureaucratic inertia, and enterprise-government collusion have plagued PSUs in countries like China and India, at times even leading to higher emissions and poor financial performance. However, these problems are not unique to the public sector; similar failures abound in poorly managed private firms. What matters is not the ownership model per se, but the quality of governance and accountability mechanisms in place.
Public enterprises, by design, are not beholden to shareholder returns. This allows them to prioritise equitable access and public welfare over pure profit. Strategic instruments like cross-subsidisation—where profits from successful PSUs support struggling ones—have proven effective in countries with a strong public sector tradition, such as Sweden. Moreover, by leveraging economies of scale, PSEs can achieve operational efficiency while keeping essential goods and services affordable.
Crucially, when paired with rising tax revenues, dividends from PSEs can fund critical investments in health, education, and infrastructure. This not only enhances the resilience of the economy but also provides a bulwark against the financial precarity often associated with unfettered capitalism.
For countries in the Global South, economic sovereignty is inseparable from sustainable development. Visionaries like Kwame Nkrumah, Ghana’s first president, understood this well. He championed the nationalisation of major industries to break the cycle of dependency on foreign capital and technology. His efforts helped double Ghana’s cocoa exports within just seven years, underscoring the potential of indigenous control over national resources.
Today, as developing countries navigate the intertwined challenges of ecological degradation, economic inequality, and geopolitical marginalisation, the case for revitalising PSEs is more urgent than ever. Select Indian public enterprises have been recognised for delivering on the “triple bottom line” of people, planet, and prosperity, showing that with effective oversight, the public sector can be a powerful vehicle for inclusive and sustainable growth.
It is time for the Global South to reclaim its resources and rewrite its development narrative—one that places equity, sustainability, and sovereignty at its core. Strengthening and reforming public sector enterprises must be a central part of that vision.
Divyanshi Sharda is a Public Policy graduate from the Jindal School of Public Policy, O. P. Jindal Global University.