Perspectives 2019 2020 Public Sector

48 Putting Public Assets to Work However, not all commodity exporting countries have been sufficiently far-sighted to create SWFs; and some SWFs have fallen victim to political interference or mis-guided investments. Moreover, many developing countries have not had the benefit of commodity riches to underpin their development via SWFs. Both these countries, and commodity exporting countries in the wake of commodity price declines, are recognizing the need to diversify their economies, create additional government revenue and strengthen government balance sheets. The best response would be to take a leaf out of Singapore’s book and reassess the potential of the other commercial assets on the government balance sheet. Public commercial assets Apart from natural resources, the public sectors of many countries around the world own a huge variety of assets, including airports, ports, utilities, banks, and listed corporations. In most instances, by far the biggest asset is a large portfolio of real estate, the value of which is several times that of all other assets. Excluding public parks and historical heritage sites, these government-owned commercial real estate assets account for a significant portion of each country’s land. But governments often know about only a fraction of these properties, most of which are not visible on government accounts. Operational assets owned at the national level are sometimes called state-owned enterprises (SOEs). Non-commodity SOEs, although less valuable than the real estate segment, play a fundamental role in many economies because they often operate in important sectors on which the broader economy depends — such as electricity, water, transportation, and telecommunication. For these reasons and others, the importance of well-governed SOEs cannot be overstated. The size of the prize The value of public assets is twice that of global stock markets — and twice global GDP, according to estimates from the IMF. But unlike listed equity assets, public wealth is unaudited, unsupervised, and often unregulated. Even worse, it is almost entirely unaccounted for. When developing their budgets, most governments largely ignore the assets they own and the value those assets could generate. Since modern accounting was invented about 700 years ago, private sector corporates have had to develop high-quality information for decision- making and for stakeholders to be able to hold them accountable. Listed stocks are constantly scrutinized by armies of analysts, brokers, investors, regulators, tax authorities, and media. The development of corporate governance systems and accounting standards has not only enabled capital market development but contributed mightily to the creation of the wealth we all enjoy today (see Box 1). But the same progress has not been made by governments. Two asset types Operational Real Transport • Roads (toll-roads) • Rail/Subway • Airports Buildings • Used (by public entity, or third party) • Unused Utilities • Energy • Water Land • Developed land • Undeveloped land Financial Services • Banks • Insurance companies • Mortgage providers