JHL (25.03.2013 - Heikki Jokinen) The government is preparing new legislation requiring municipalities to establish companies instead of public enterprises. The Act is based on European Union competition legislation, which sees public enterprises as a form of public support and thus serve to distort competition. Public enterprises must now be re-established as companies if they operate in a field where private competition also exists.
Director Päivi Niemi-Laine from JHL claims that there is no need to corporatize a municipal enterprise if it only sells services to its owners or to the municipalities it is serving. "It is important to consider, too, the possibility that the enterprise will withdraw from the market. In this case there is no need to corporatize it", she says.
Niemi-Laine urges municipal decision makers to evaluate carefully the pros and cons of corporatization. "The main task of a municipal enterprise is to serve the municipal organisation and its citizens. For this purpose no corporation model is needed. And setting up companies also has certain disadvantages. Decision making is moved further away and important activities tend to be concealed under the cloak of business secrets."
In Finland new legislation will most probably affect harbours and energy enterprises. It may also impact other areas like food service in cases where public enterprises are selling their services on the open market.
Director Niemi-Laine also reminds us that major municipal reform (now being planned) is expected to take place in Finland in the years 2016 and 2017. It would make better sense to corporatize municipal enterprises at the same time, there is no need to hurry, she argues. This would give the local authorities time to prepare for changes.
Especially and vitally important is that the water service remains as a municipal service. "Water is an absolutely necessary basic right. It shall not be made into a business."
Corporatization is also a politically sensitive issue, as it may be seen as a first step towards privatisation or the selling off of public services.