4.2. Corporatization
Another reform option is the corporatization of the Water Supplies Department. In Hong Kong, all rail services
are already provided by public corporations. The assets of these public corporations remain in the public
sector, but the employees are no longer civil servants. The managers of these public corporations are instructed
to operate the companies according to commercial principles. As these public corporations are monopolists,
competition in rail services simply does not exist. The public has expressed dissatisfaction with regard to the
exorbitant amount of compensation paid to existing and retired managers despite unsatisfactory performance.
The managers of public corporations are responsible to bureaucrats, not shareholders. As the companies are not
listed on the stock market, the threat of a takeover to discipline managers simply does not exist.
In the 1980s, the governments of Australia and New Zealand (Bollard and Mayes, 1993) attempted to
improve the performance of the utility sector, and to increase the productivity of the whole economy, by
adopting the policy of corporatization. Under this policy, managers of public corporations were required to run
the companies as successful business enterprises. Many industries have been deregulated and competition has
often been introduced to encourage efficient production. Despite these reforms, the growth of corporatized utilities
has been limited by insufficient government funds. They are also unable to use the stock market to finance
expansion. The operations of public corporations are still under ministerial and departmental control, and the taxpayers
are forced to invest in them (Foster, 1992). Recently, the governments of these two countries
embarked on an outright sale of government assets to remove the financial constraints imposed on public corporations.