The Role of the public sector (Parastatals) in economic development

Positive role

1. It provides productive social and economic infrastructure.  This is in form of water   supply, power supply, roads, schools, hospitals,   financial   institutions   etc. This leads to the development of the industrial   and agricultural   sectors.
2. The public sector has the ability to operate risky businesses ventures which require large capital that cannot be raised by private individuals.
3. It promotes proper planning of the economy. Parastatal organizations   make  economic   planning easy because   they  enhance  government   control  of the development  plans and programs unlike the private  sector  which  is outside  the state control.
4. It promotes technological   development   in   the   country.   The   public    sector    spear    heads technological progress   especially   in developing    countries.   This is because   it has the ability to carry out research aimed at inventing and innovation   the existing technology.
5. The public sector helps to redistribute income and wealth in the economy. This   is done by carrying out progressive   taxation and evenly distributing   the social and economic   infrastructure. This helps to ensure balanced regional development   and reduce income inequalities.
6. The public sector is in position to provide basic essential goods and services which are nonprofit making.   Some  business   ventures   are  commercially   unprofitable   and  not  attractive   to  the private  sector  which  is profit  orientated   and yet they may be economically   and socially   desirable. The state comes in to provide such vital services through Parastatal bodies.
7. Parastatals help to create more employment opportunities. This is in form of the production activities   and public enterprises   established   to provide   services   to the people.   This is possible even if the Parastatal   is making losses.
8. Some key areas like production of fire arms cannot be left in the hands of private individuals. This is because it may cause insecurity in the country hence the need for the public sector.
9. Parastatals help to protect consumers from exploitation which is common   under   the private sector.  This is because the government   aims at promoting   the welfare of the people.
10. It helps to improve on the balance of payment position of the country. The government has the ability to   initiate   programs    like   export   promotion    policies,    setting   up   import substitution industries as well as trade restrictions.
11. Political instability in some parts of the country.   This discourages    private   individuals    from setting up meaningful   businesses   due to fear of losing life and property.