Over the last 30 to 40 years, the limited purpose, underloaded states of earlier times have evolved, or been moulded, into the multi-institutional, multi-purpose states which are so much a distinctive feature of the present era. The stimulus for this remarkable development has come, in part, from the relevant communities in the form of numerous public demands for various kinds of state action; and also, in part, from the desires or perceived needs of governments to become directly involved in all manner of social and economic activity within their societies. In the process, the institutional machinery of many states has inevitably become large and complex in terms of both the number and variety of components, and the range of functions performed. Indeed, the situation in most of these states is now such that the capacity of governments to govern is actually being seriously eroded by the effects of structural and functional overload. The main effects are sizeable budget deficits and foreign debts, the problems of which are frequently exacerbated by organizational inefficiencies and waste.

The significance of this last remark is particularly apparent in respect of state enterprises, or public enterprises as they are normally called: that is, those organizations within government which, although often variously structured, all have established business or commercial responsibilities of one kind or another and, thus, constitute the main means by which a government is directly involved in the development and operation of an economy. These enterprises tend, in many countries of the world, to be over-staffed, underproductive, inadequately responsive to market forces, and unprofitable. Of course, there are important exceptions, including, for example, the system as a whole in Singapore; however, the situation, in general, is that which has just been indicated. Hence, it is not surprising that many governments in the last few years have been keen to consider, and often to adopt, a variety of means of transforming selected enterprises. An underlying and continuing objective is obviously to enhance the performances of the enterprises concerned and/or to relieve the state of organizational and financial burdens which really can no longer be carried.