ABSTRACT

The real costs are far higher than the costs found in their books of account – a point that merits notice in a dispassionate appraisal of the socio-economic comparative advantage of public enterprises. The circumstances of capital procurement by public enterprises – mainly from government sources – and the accounting practices adopted by them tend to understate the real costs of capital below the full, opportunity costs of the resources employed. It is useful to establish the latter at least in notional terms so that proper decisions may be reached on investment, pricing and subsidies and so that meaningful evaluations of comparative advantage of a given enterprise may be made. In most developing countries the cost one has to attach, conceptually, to the use of capital is higher than is represented by the interest rates entering the enterprise accounts. Public enterprises call for particular attention for various reasons.