It is expected that future generations will bear the consequences of today's decisions, which is why it is vital that governments have the right expertise to understand how their assets and liabilities will change. Balance sheet management has just recently shifted into government focus. However, that is changing as governments worldwide experience low growth in tax revenues and inevitable pressure on spending.
اضافة اعلان
The global economy is projected to decelerate to 2.7 percent in 2023, and the outlook for 2023 remains gloomy. Concerns regarding a new recession and high geopolitical risk in a multipolar world continue to float. That said, analysts expect the industry to keep growing steadily until 2030.
Effective use of a government balance sheet, especially public commercial assets (i.e., any government-owned asset) that can generate an income if professionally managed, is essential. In Singapore, for example, the strategy to move the economy from barely surviving to one of the richest in a single generation highly depended on the effective use of a government balance sheet.
Both Australia and New Zealand are focusing on strengthening their balance sheets over time to improve national savings and provide a buffer against external shocks. Their fiscal policy objectives explicitly include improving net financial worth, reducing net debt, and achieving or maintaining surpluses.
As more governments start to prepare accruals-based financial statements, there is a real opportunity to embed balance sheet management into public sector economic governance. Assets can be used to generate a return, whether financial or social.
Fully embracing the term "commercial" in "public commercial assets" opens a new line of thinking. And such assets should be viewed as privately owned, with value maximization being the sole objective of any decision related to them.
The market value of these assets would be a multiple of the global GDP. On top of that, we have commercial assets at the local (city and provincial) government level that is at least of the same magnitude, if not larger. This public wealth represents a substantial opportunity for investors, businesses, and society.
The public assets of most countries are more significant than their public debt. The value of public support is twice that of global stock markets and twice that of global GDP, according to estimates from the IMF. In the same way, the public sector needs an organizational vehicle to manage its portfolio of commercial assets to interact professionally and transparently with the private sector.
While many countries scramble to find new revenue streams worldwide, most governments are sitting on a virtual gold mine, the national wealth fund (NWF).
The NWF could manage a portfolio of operational assets and maximize the portfolio value through active management, including developing, restructuring, and monetizing individual assets to create a sustainable ecosystem.
A simple two-step process for professionalizing public wealth management starts with understanding the "size of the prize", an indicative valuation, or an "asset map" of the public and commercial assets portfolio. This process is followed by consolidating and institutionalizing professional ownership of the assets inside one or several holding companies.
Most governments largely ignore these assets and the value that they could generate. Estimates indicate that professional management of public support could generate annually more revenues than developed economies receive in corporate tax collections and multiply the amount of funding available for infrastructure investments, as well as pay for the SDGs.
Fully embracing the term "commercial" in "public commercial assets" opens a new line of thinking. And such assets should be viewed as privately owned, with value maximization as the sole objective of any decision-making about them.
Such a mechanism is necessary to improve fiscal sustainability and increase budgetary space. It would mobilize revenue and strengthen countries' balance sheets through professional management of public assets and solid public value through cooperation with the private sector in various Public-Private Partnerships.
Transportation assets such as airports, postal systems, highways, ports, and subways have significant real estate assets that can generate substantial value and yields if managed professionally through independent holding companies. One of the best examples of railways is the MTR Corporation in Hong Kong, China, which has built one of the most efficient subway systems (the size of New York City) without using one tax dollar.
Effective asset management has become as critical as ever across the globe, facing mounting pressures, such as limited resources, growing urban populations, shifting patterns of employment and land use, climate-related disruptions, and health emergencies. This will help in promoting sustainable and inclusive economic growth.
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