Introduction of Crown Assets
Crown Assets are assets that are legally owned by the federal, state, or local government of a country. (i.e.) People with authority to govern the country or state will manage the crown assets and they have complete privileges over those assets.
Crown assets are under the management and control of the government. Though they are known to be public property, the general public can only use those assets and they cannot claim any ownership on the same, and not all assets are freely accessible to them. (E.g.) Army base, research lab, etc. are government-owned but they are highly restricted, and the general public cannot have access to it. On the other hand, public playgrounds or parks, libraries, etc. are owned by the local governmental body and it gives free access to all the general public. Crown assets include both tangible and intangible assets. It is also called as Government Assets.
Types of Crown Assets
Assets Owned by Government: These are Physical assets that are owned by the Government.
Assets Administered by Government: These are assets that are considered as public utilities that are managed and administered by Government.
Examples of Crown Assets
Examples of crown assets are given below:
Assets Owned by Government: Land, buildings, National defense and equipment, Vessels, Aircraft, State-owned corporations, Embassies, Shares, and stocks, etc.
Assets administered by Government: Public parks, library, Roads, Sewers, water tanks, Government Hospitals, Government Schools, etc.
Importance of Crown Assets
- Strengthens the Financial Position of the Country: It is always better to hold more assets than liabilities. When the Government owns more assets, it is good for the country and it creates a strong financial position for the country, and it helps the government to fund the social benefit plans and it will be helpful for the future.
- Supportive During Distress/ Economic Recession: These assets are helpful to the government at the time of crisis or economic recession which can be used to bring the economy back to a good state. During catastrophes, the general public can be benefitted out of these assets and it acts as a strong background for the government.
- Positive Rating for the Government: If the Government has a good amount of assets then the credit agencies give a positive rating for the government which in turn helps to attract foreign investors and may bring foreign fund incoming into the economy. A Positive rating boosts the confidence of foreign portfolio investors and encourages them in doing business with the country considering the financial stability of the Government.
- Delivering Public Service: Crown assets are used for delivering service to the public such as Government schools and hospitals. It also includes the infrastructure of the country like roads constructed by the government to serve the needs of the public.
Some of the advantages are given below:
- Develops and Supports the Economy: Assets owned by the Government are used for productive purposes and towards the benefit of the society and general public such as Roads, libraries, Government Schools, Government Hospitals, sewer systems, etc. It will develop and support the economy of the country.
- Social Benefit: Public assets like libraries, roads, sewers, etc. benefits the public and residents of the country in a bigger way. These assets contribute to the improvement in the standard of living of the people in the country. This plays a role in judging the status of a country like developed, developing, and underdeveloped countries.
- Surplus Assets can be Sold off: If the government considers any asset is in surplus or not much needed to them then they can sell off the surplus assets and use those funds for other purposes. These assets are sold off by government auctions and the receipts are used for government projects.
- Divestment of Assets: If the government feels that any specific asset can be managed better by privatization, then they plan divestment of assets so that it can be managed efficiently under the new management. Divestment of Assets brings in a cash inflow to the Government as well it reduces the burden of managing the assets and those resources can be utilized in managing other assets of the government.
Some of the disadvantages are given below:
- Sale of Crown Assets: When the Government decides to sell its assets, it may impact the rating of the government as rating agencies will reduce the rating considering the present net worth. This may also impact foreign investments and it may also indicate to other countries that the Government has some financial difficulties.
- Mismanagement of Assets: Government is nothing but people with authority, therefore there are chances where the assets are not used for the economic and social benefits and there can be misuse and mismanagement of assets. If the government is corrupt, then there can be a significant impact on the crown assets, and it may also lower the confidence of foreign countries and investors in the government
- Non-Beneficial Crown Assets: There can be chances that sometimes crown assets may be useful to the government for meeting their financial needs (i.e.) All government assets cannot be sold at the time of need/distress such as Roads, sewers, etc.
Crown Assets are owned by a government or government entity and it plays an important role to decide on the economic stability of the Government of a country as it acts as a deciding factor to get the confidence of foreign investors and foreign countries. It also helps to enhance the living of the general public and contributes towards the welfare of society.
It can be used as secondary finance by the government at the time of financial crisis or distress. If these assets are efficiently managed, then they are really good resources to manage the economy in a good way. But, if the country has lots of debt and external borrowings then they may end up in selling the crown assets to manage the finance and it brings down the net worth of the country and spoils the image of the government and country before foreign countries and investors and they may not win their confidence. Thus, crown assets contribute to the development of the nation and benefit society at large. More the crown assets the better it is!
This is a guide to Crown Assets. Here we also discuss the introduction and types of crown assets along with advantages and disadvantages. You may also have a look at the following articles to learn more –