## ch3

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### Introduction and scope
- Definition and shared elements of an SOE:
  - (1) the entity has its own, separate legal personality;
  - (2) the entity is at least partially controlled by a government unit;
  - (3) the entity engages predominantly in commercial or economic activities.
- Ownership thresholds used in the chapter’s quantitative empirical analyses:
  - A firm is considered state owned if the government owns at least 50 percent of its equity;
  - In some exercises the analysis focuses on cases where the government owns at least 20 percent.
- Key guiding questions:
  - Do SOEs deliver value for taxpayers’ money? Are policy mandates well defined, adequately funded, and contributing to economic and social goals?
  - How can governments manage the challenges and risks associated with SOEs? Do governments have clear strategies and institutions to regularly evaluate SOE performance and assess whether each SOE is the best tool to achieve a policy goal?
  - Does the internationalization of SOEs bring new challenges? Is government support compensating only for the cost of pursuing policy mandates or giving SOEs competitive advantages over private firms?

### Scale, sectors, and internationalization: key statistics
- Historical and cross-country scale:
  - By the early 1980s, SOEs accounted for 8 percent of output, on average, in advanced economies and 15 percent in developing countries.
  - SOEs operate in virtually every country; in some countries they number in the thousands (China, Germany, Italy, Russia, Sweden, Ukraine).
  - SOEs accounted for more than half of all infrastructure project commitments in emerging market economies and low-income developing countries in 2017.
- Banking and sector concentration:
  - Banking-sector SOEs account for 40 percent or more of banking system assets in the BRIC economies and some low-income developing countries, and one-third or more in Germany and Portugal among advanced economies.
  - In half of the G20 countries and several large developing economies, public banks hold around 20 to 60 percent of banking system assets.
  - Sector concentration among large SOEs: banking, energy, industrials, and utilities; national oil companies control more than half of global oil and gas production.
- Global asset and debt scale of large SOEs:
  - The share of SOE assets among the world’s 2,000 largest firms has doubled to 20 percent over the past decade.
  - SOE assets among the world’s largest firms totaled $45 trillion in 2018, equivalent to 50 percent of global GDP.
  - The debt of the largest SOEs is $7.4 trillion, compared with $1.4 trillion in 2000.
  - SOEs have accounted for 5–15 percent of annual cross-border acquisitions since 2008.
  - SOEs comprise one-third of the entire emerging market sovereign hard currency debt tracked in the most widely followed emerging market sovereign bond index (October 2019 Global Financial Stability Report).
  - Among the largest SOEs in the world, almost 60 percent have a mix of public and private sector owners.

### State-owned multinational enterprises (SOMNEs)
- Definition: a SOMNE is an SOE that controls assets of other entities in countries other than its home country.
- Presence and examples:
  - SOMNEs are concentrated in China, members of the European Union, India, Malaysia, Russia, South Africa, and the United Arab Emirates.
  - In 2018, half of the top 10 nonfinancial firms globally (by revenue) were SOMNEs.
  - Examples of largest nonfinancial SOEs include China National Petroleum, Volkswagen AG, Saudi Arabian Oil Company, Gazprom, and Rosneft.

### Drivers of SOE underperformance and fiscal risks
- Common operational and mandate drivers:
  - Pricing and service mandates: below-cost pricing or tariffs can lead to systematic losses, buildup of SOE debt (including arrears), inefficient provision (example: deterioration of the railway network from lack of maintenance), or limited accessibility (example: electricity grid not reaching rural areas).
  - Social and employment mandates: employment-promoting mandates can raise labor costs and weaken firm efficiency and financial viability.
  - Government bailouts: expectation of compensation or rescue can incentivize risk-taking and excessive borrowing.
  - Weak governance and oversight: government agencies often lack sufficient information or capacity to monitor SOEs; some countries lack guidelines for SOE financial reporting.
  - Costly government dividend and tax policies: excessive dividend payouts can impair SOE operations (example: YPF paid dividends of $602 million in 2016 despite incurring a loss of more than $1 billion that year).
- Network-sector specific risks:
  - Power: SOEs dominate transmission and distribution; 840 million people live without electricity, most in Africa; failure to achieve cost recovery reduces capacity to invest.
  - Water: more than 2 billion people lack safely managed services; delivery systems require major infrastructure investment; examples of remunicipalization include Paris (France) and Berlin (Germany).
  - Transport: local public transportation often provided by local SOEs; charging prices that cover investment and maintenance remains challenging.
- National Oil Companies (NOCs) and resources:
  - NOCs are significantly less profitable and efficient than private peers in part due to government pressure for excessive hiring and social spending; governments sometimes expose themselves to exploration costs instead of taxing profits.
- Public banks and sovereign-bank nexus:
  - Public banks used in crisis responses (examples: Brazil, Canada, India); public-bank lending has been less procyclical on average but not in developing countries with high public debt.
  - Public banks tend to hold larger amounts of sovereign debt than private banks, especially in emerging market and developing economies.
  - Example vulnerabilities: BNDES credit surge then decline; India—government guarantees expanded credit during the global financial crisis, later loan quality deterioration increased contingent liability risks.

### Empirical evidence and dataset notes
- Firm-level dataset:
  - Analysis uses data for about 1 million individual firms across 109 countries.
  - Of the 969,000 firms in the sample: about 949,000 are fully private, 15,000 are majority state owned, and 4,000 are minority state owned.
  - The database includes mainly firms from advanced and emerging market economies with a smaller sample from low-income countries.
- Aggregate performance findings:
  - Simple comparisons show profits and labor productivity are lower in SOEs than in private firms.
  - In countries with high perceived corruption, SOEs are "one-third as productive as private firms, on average"; in countries with strong governance, the productivity gap is 7 percent.
  - The gap in profitability remains significant even with good governance: a difference of 4 percentage points in return on equity between SOEs and private firms in countries with good governance scores.
  - Firm productivity is lowest when the government has a majority position—private firms are three times more productive—while the gap is narrower when the government has a minority position.
- Definitions and thresholds used in bank analyses:
  - Public banks are defined as banks with over 25 percent of equity owned by the government.
  - Countries with high public debt are those above the 75th percentile of the distribution across the whole sample, roughly corresponding to 100 percent of GDP for AEs and 60 percent of GDP for EMDEs.

### Profits, fiscal costs, and realized risks
- Historical government support:
  - Maximum annual support to financial SOEs reached 18 percent of GDP.
  - Maximum annual support to nonfinancial SOEs reached 16 percent of GDP.
- Country and firm examples:
  - Eskom (South Africa) is receiving a rolling government bailout of 2⅓ percent of GDP over three years.
  - Belarus: the government provided on average 1½ percent of GDP in subsidies and about 2 percent of GDP in additional off-budget support.
  - Alitalia: privatized in 2009, minority stake taken in 2014, special administration in 2017, reincorporated as a public holding in 2020.
- Debt and liabilities:
  - In some countries, SOE debt exceeds 20 percent of GDP; in several cases SOE liabilities constitute half or more of the public sector debt stock.
  - In some countries, SOE external debt exceeds 25 percent of the countries’ exports of goods and services.
- Macroeconomic multipliers of realized SOE risks:
  - Public bank distress can curtail credit growth and undermine economic activity.
  - Large, impaired nonfinancial SOEs can affect employment, investment, the financial system, and competitiveness (examples: Ghana, The Gambia).

### Evidence on reforms and impacts
- Reform types studied in IMF-supported programs (2002–17):
  1. SOE governance (management, oversight, transparency);
  2. Public enterprise pricing (tariffs, automatic fuel price mechanisms);
  3. Arrears clearance;
  4. Achievement of specific financial targets.
- Estimated reform impacts:
  - Governance and pricing reforms improve financial variables across most sectors except mining.
  - Example quantitative impacts: an implemented governance reform associated with an increase in productivity of $10,000 per worker and a reduction of costs of 5 percent in the electricity sector.
  - Arrears clearance and financial target-setting show weaker or no impact when implemented without broader structural reforms.
- Country reform examples:
  - Jordan: Subsidies to NEPCO were close to 6 percent of GDP in 2014 (for context, total health spending was 7.5 percent of GDP that year). Reforms included gradual tariff adjustments since 2012 and installation of a liquefied natural gas plant; public transfers to NEPCO were eliminated as of 2015; NEPCO posted small positive or negative net operational balances since 2016.
  - Ukraine: Naftogaz turned from loss-making with significant budget aid to profitable following gas and heating price increases, restructuring, and governance reforms as of 2014, accompanied by extension of utility subsidy programs for vulnerable households.
- Reform design takeaway:
  - Governance and pricing reforms delivered the largest improvements;
  - Reform packages need to be sequenced and sustained, with protections for vulnerable households.

### Policy recommendations and institutional reforms
- Ownership policy and institutional design:
  - Ownership policy should clearly state the mandates, objectives, and a dividend policy for SOEs; the approach to achieving professional boards of directors; the functions carried out by the government as owner and coordination with fiscal risk oversight functions; and the way the government exercises its ownership rights.
  - Distinguish and disclose commercial and noncommercial activities to assess SOEs’ effectiveness in achieving value for money.
  - Governments must develop capacity to properly oversee operations while avoiding excessive intervention; enforce transparency requirements; and establish a sound SOE corporate governance framework.
  - Implement anticorruption strategies to prevent use of SOEs for private gain.
- Oversight and financial control:
  - A strong oversight and control agency can yield better performance; centralized models (autonomous agency or holding company) provide consistency between ownership and financial oversight (examples include Finland, France, Kenya, Malaysia, Peru, and Singapore).
  - Core oversight functions: identify, disclose, and mitigate fiscal risks at individual-company and SOE-portfolio levels; assess and approve SOEs’ investment plans with technical and economic appraisals; subject projects involving direct budgetary costs to a selection process consistent with medium-term fiscal objectives.
  - Recommended approaches to contain risks: explicit no-bailout clauses; subject SOEs to effective insolvency procedures similar to private firms (examples: Italy, Korea, the Netherlands, Sweden, and the United Kingdom); provide SOE management incentives to manage risks (performance contracts and benchmarking).
  - Regularly review SOE portfolios to assess whether state ownership remains justified; sell, close, or privatize firms where appropriate.
- Transparency and fiscal integration:
  - Fully integrate SOE financial operations, assets, and liabilities into public sector financial statements via a public sector balance sheet approach where feasible.
  - Where full integration is not yet feasible, publish memorandums summarizing government guarantees to SOEs and follow recommended SOE financial disclosure practices.
  - Preferably include nonfinancial SOEs in fiscal targets when they pose significant fiscal risks and where the government is a majority shareholder; at minimum, include SOE debt in public sector debt when the SOE poses a fiscal risk.
  - SOE financial statements should be audited by the national audit office or private audit firms approved by the national audit office.
  - Fiscal risks associated with SOEs, including contingent liabilities, should be regularly reported; fiscal risk statements are a recommended vehicle (examples: Austria, Georgia, and the Philippines).
- Getting firm-level incentives right:
  - Pricing policy: pricing rules should be transparent and depoliticized; prices should preferably ensure cost recovery (including investment) while protecting vulnerable households; if cost-reflective pricing is not feasible, governments should compensate SOEs in a timely and transparent manner; prevent excessively high prices where SOEs have monopoly power.
  - Independent regulatory agencies: regulators should balance interests and ensure transparent, well-defined rules; in low-income countries, pooling resources in a single regulator across sectors can build capacity.
  - Professional management and managerial independence: corporate governance structures should promote sound hiring, wage, and procurement policies, supported by a professional board and high transparency.

### Transition pathway and sequencing
- Three main pillars of reform:
  1. Get Started: know SOEs (collect data), record and report all transactions between government and SOEs, improve reliability and timeliness of SOE financial reporting.
  2. Build SOE Oversight Function: approve SOEs’ strategy and budget, set limits on SOE borrowing and contingent liabilities, quantify mandates, produce a fiscal risk statement or report on SOE sector.
  3. Drive Efficiency and Competitiveness: overarching SOE act and ownership policy, boards with professional members from the private sector, robust SOE performance management cycle, fund quasi-fiscal activities through the budget.
- Implementation notes:
  - Reforms take time and resources; low-capacity countries should adopt a risk-based and sequenced approach focusing on higher-risk SOEs.
  - IMF staff have supported development of SOE risk analysis templates in several countries during the past decade, most recently in Armenia (2015), Namibia (2018), and Serbia (2019).

### International dimension and competitive neutrality
- Concerns from SOE global expansion:
  - SOE expansion abroad may reflect home-country goals beyond commercial objectives (control of natural resources, acquisition of technology, political or diplomatic objectives).
  - Available data suggest SOE officials received 80 percent of total bribes in foreign bribery cases (OECD 2014).
  - SOEs in the power sector account for a substantial quantity of greenhouse gases (OECD 2018c).
- Competitive neutrality initiatives and proposals:
  - Examples: EU and Australia have comprehensive approaches; Australia requires SOEs to make compensatory payments for regulatory or debt-financing advantages (OECD 2016b).
  - Proposal for a voluntary multilateral agreement on general principles to promote transparency on mandates and government support, nondiscriminatory treatment, and common methodologies.
  - Important elements to address: cost allocation transparency; debt neutrality and assessment of implicit government guarantees; return adequacy benchmarks; valuation of captive home markets and in-kind benefits; ensure similar tax, regulatory, and procurement rules; require compensatory payments if SOE cost of capital is lower than benchmark.

### Privatization: evidence, risks, and preconditions
- Empirical findings:
  - Privatization, done right, can improve firm performance and public finances; however, privatized firms tend to underperform firms that have always been private.
  - Privatization outcomes vary by sector, market structure, and country institutions; outcomes have disappointed when complementary institutional and market reforms are lacking.
  - Examples of mixed evidence: water privatization in Guinea increased access by 10 percent from 1986 to 1997 but raised price 40 times and was reversed in 2003; California electricity privatization in the 1990s led to price hikes.
- Preconditions for successful privatization:
  - a solid regulatory framework and well-functioning legal system;
  - an effective and independent regulator;
  - strong property rights;
  - relatively low levels of corruption to permit transparent sales;
  - sufficient competition in the underlying market and openness to foreign direct investment.

### Conclusions and takeaways
- SOEs have major economic and fiscal effects and are among the largest companies globally; they can be global players.
- Many SOEs have low productivity, distort competition, and can be plagued by corruption.
- In developing countries, SOEs have often fallen short in providing basic services (safe water, sanitation, reliable electricity) to the entire population.
- SOEs have been significant drains on government budgets and in some cases contributed to economic and fiscal crises.
- Addressing governance, transparency, oversight, and competitive neutrality concerns can deliver domestic and global benefits.

*Source: ch3 - Introduction; ch3 - 6.5 percent in Ukraine in 2000.; ch3 - 1. Profits and Costs; CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent, April 2020, International Monetary Fund (ch3, https://www.imf.org/-/media/files/publications/fiscal-monitor/2020/april/english/ch3.pdf).*

### Introduction

### ch3 - Introduction

### Role and characteristics of SOEs
- SOEs influence the economy and people’s lives through the provision of goods and services in ways that are distinct from, and more varied than, the direct action of governments.
- Shared elements of an SOE: (1) the entity has its own, separate legal personality; (2) the entity is at least partially controlled by a government unit; and (3) the entity engages predominantly in commercial or economic activities.
- For the chapter’s quantitative empirical analyses: a firm is considered state owned if the government owns at least 50 percent of its equity; in some exercises the analysis focuses on cases where the government owns at least 20 percent.

### Key questions guiding the chapter
- Do SOEs deliver value for taxpayers’ money? Are policy mandates well defined, adequately funded, and contributing to economic and social goals?
- How can governments manage the challenges and risks associated with SOEs? Do governments have clear strategies and institutions to regularly evaluate SOE performance and assess whether each SOE is the best tool to achieve a policy goal?
- Does the internationalization of SOEs bring new challenges? Is government support compensating only for the cost of pursuing policy mandates or giving SOEs competitive advantages over private firms? Can SOEs contribute to other global goals (for example, curbing domestic pollution and mitigating climate change)?

### SOEs’ evolving landscape and historical context
- SOEs grew in size and importance throughout most of the twentieth century; by the early 1980s, SOEs accounted for 8 percent of output, on average, in advanced economies and 15 percent in developing countries.
- From the 1980s onward, many countries pursued corporatization and partial or full privatization; the transition to market economies after 1991 reinforced these trends.
- Recent dynamics: China’s rapid growth and large SOE presence renewed interest in SOEs as development vehicles; some countries have announced new privatization plans (Brazil, Egypt, India, Morocco).

### Scope, sectors, and scale of SOE activity
- SOEs operate in virtually every country; in some countries they number in the thousands (China, Germany, Italy, Russia, Sweden, Ukraine).
- SOEs are especially prevalent in key network sectors—banking, utilities, and transportation—and in power generation in Africa and Asia.
- SOEs accounted for more than half of all infrastructure project commitments in emerging market economies and low-income developing countries in 2017 (Figure 3.1).
- Banking-sector SOEs account for 40 percent or more of banking system assets in the BRIC economies and some low-income developing countries, and one-third or more in Germany and Portugal among advanced economies (Figure 3.2).
- In half of the G20 countries and several large developing economies, public banks hold around 20 to 60 percent of banking system assets.

### The largest SOEs and internationalization
- Over the past decade, the share of SOE assets among the world’s 2,000 largest firms has doubled to 20 percent.
- SOE assets among the world’s largest firms totaled $45 trillion in 2018, equivalent to 50 percent of global GDP.
- The debt of the largest SOEs is $7.4 trillion, compared with $1.4 trillion in 2000.
- SOEs have accounted for 5–15 percent of annual cross-border acquisitions since 2008.
- SOEs now comprise one-third of the entire emerging market sovereign hard currency debt tracked in the most widely followed emerging market sovereign bond index (October 2019 Global Financial Stability Report).
- Sector concentration among large SOEs: banking, energy, industrials, and utilities; national oil companies control more than half of global oil and gas production.
- Among the largest SOEs in the world, almost 60 percent have a mix of public and private sector owners.

### State-owned multinational enterprises (SOMNEs)
- A SOMNE is an SOE that controls assets of other entities in countries other than its home country.
- SOMNEs are present globally and concentrated in China, members of the European Union, India, Malaysia, Russia, South Africa, and the United Arab Emirates.
- In 2018, half of the top 10 nonfinancial firms globally (by revenue) were SOMNEs.
- Examples of largest nonfinancial SOEs include China National Petroleum, Volkswagen AG, Saudi Arabian Oil Company, Gazprom, and Rosneft.

### How SOE evolution exacerbates policy challenges
- Mixed ownership blurs the line between state and private ownership and complicates assessment of government influence (examples: golden shares, indirect ownership via public banks, public pension funds, or sovereign wealth funds).
- Government support to SOEs can take many forms: budget compensation (subsidies, capital transfers), cheap debt and equity financing, special tax and regulatory provisions, privileged market positions, superior access to information, and rescues from bankruptcy.
- Support may not be linked to a specific public mandate or may exceed the net cost of the mandate, creating competitive advantages over private firms (example: Deutsche Post cross-subsidizing parcel delivery using letter-delivery monopoly profits over 25 years until 2000).
- IMF staff estimates based on a sample of SOEs in 65 countries suggest SOEs benefit from lower debt-financing costs, on average, relative to private firms (Figure 3.7).
- SOE government-bestowed competitive advantages can distort competition, sustain inefficient SOEs, lower growth and tax revenues, and create international tensions when expansion abroad is perceived as linked to foreign policy or national security goals.

### Empirical and sectoral concerns
- Recent studies in aluminum, semiconductor, and steel sectors estimate sizable government support through budget support, subsidized inputs, below-market loans, and equity financing (OECD 2019a, 2019b); SOEs produced one-third of global steel output in 2016 amid concerns about overcapacity.
- SOEs have become big players in global corporate debt markets and cross-border M&A.

### Achieving policy objectives and common weaknesses
- Governments mandate SOEs to pursue diverse policy goals, often to correct market failures (natural monopolies, public goods).
- SOEs are also used to develop new sectors (examples: copper-mining sector in Chile in 1976; oil and gas sector in Ghana in 1983) or to pursue broad macroeconomic goals (for example, promoting credit growth).
- Core problems preventing SOEs from meeting mandates sustainably:
  - Mandates are often not clearly specified or adequately costed.
  - Limited transparency of SOE operations and financial relations with government.
  - Resulting problems include unfunded mandates: lack of clear and funded mandates can weaken the financial health of SOEs.

*Italic: Source: ch3 - Introduction (ch3 - Introduction, https://www.imf.org/-/media/files/publications/fiscal-monitor/2020/april/english/ch3.pdf).*

### 6.5 percent in Ukraine in 2000.

### ch3 - 6.5 percent in Ukraine in 2000.

### Drivers of SOE underperformance and fiscal risks
- Pricing and service mandates: Below-cost pricing or tariffs set to ensure affordability can lead to systematic losses, buildup of SOE debt (including arrears), inefficient provision (for example, deterioration of the railway network from lack of maintenance), or limited accessibility (for example, the electricity grid not reaching rural areas) (Ter-Minassian 2017).
- Social and employment mandates: If an SOE is asked to promote employment, higher labor costs may weaken the firm’s efficiency and financial viability.
- Government bailouts: Expectations that governments will compensate or bail out SOE losses can incentivize managers to avoid pursuing efficiency, take larger risks, or borrow excessively.
- Weak governance and oversight: Government agencies often lack sufficient information or capacity to properly monitor SOEs; some countries lack guidelines for SOE financial reporting (Allen and Vani 2013). Weak governance and corruption are identified as main sources of SOE difficulties (April 2019 Fiscal Monitor; Wilkinson 2018).
- Costly government dividend and tax policies: Excessive dividend payouts dictated by budgetary needs can impair SOE operations. Example: Argentina’s state-owned oil company, YPF, paid dividends of $602 million in 2016 despite incurring a loss of more than $1 billion that year.

### Network sectors: special challenges (power, water, transportation)
- Rationale for government intervention: Network industries require fixed infrastructure and standardization to deliver services efficiently; they are critical for growth and the Sustainable Development Goals.
- Power sector structure and issues:
  - SOEs dominate transmission and distribution and remain major players in generation.
  - Access challenge: 840 million people live without electricity, most in Africa.
  - Cost-recovery shortfalls: Failure to achieve cost recovery (gap between total cost and tariff) reduces SOE capacity to invest, hurting access and growth.
- Water sector specifics:
  - Delivery systems require major infrastructure investment; potable water and sewerage are essential for public health.
  - Public provision is dominant among advanced economies (examples listed: Australia, Germany, Japan, United States); a few rely significantly on private providers (examples listed: Czech Republic, France, England).
  - Remunicipalization examples: Paris (France), Berlin (Germany), and several US municipalities have remunicipalized water management (Warner and Aldag 2019).
  - Access shortfall: More than 2 billion people lack safely managed services, partly reflecting weak SOE performance (WHO and UNICEF 2017; World Bank 2004).
  - Cost recovery examples: Burkina Faso doubled access to drinking water over two decades by introducing a progressive tariff grid (IMF 2015). Mali’s private concession on water and electricity failed due to tariff disagreement, political interference, and the government not paying its own utility bills (Balance and Tremolet 2005; Estache and Wren-Lewis 2009).
- Transportation sector:
  - Local public transportation (trains, subways, buses) often provided by local SOEs to ensure affordability and address congestion, pollution, or accidents.
  - Informal private transportation services are widespread in emerging markets and developing economies and are often less safe and more polluting.
  - Allowing SOEs or private operators to charge prices that cover investment and maintenance remains challenging; example cited: Chile metro fare reform and subsequent financial viability issues.

### National Oil Companies (NOCs) and resource SOEs
- Rationale: Many oil-exporting countries created NOCs to control exploration and capture profits for the state.
- Performance and risks:
  - NOCs are significantly less profitable and efficient than private peers, in part due to government pressure for excessive hiring.
  - NOCs often sell fuel at subsidized retail prices and undertake social spending.
  - Governments sometimes have NOCs undertake exploration, exposing the state to exploration costs and risks instead of taxing profits.
  - Large resource-sector profits create strong incentives for corruption (April 2019 Fiscal Monitor).

### Public banks: use, limits, and fiscal interactions
- Types and roles: Public banks include commercial banks (corporate and retail services) and development banks (credit for development projects). State ownership has declined since the 1990s but remains significant in several large economies.
- Crisis response role:
  - Used widely during the global financial crisis for recapitalizations and to support markets and firms; examples of policy tools include direct budget support, raised credit ceilings, and special guarantees.
  - Example country actions: Brazil, Canada, India provided direct support; Finland and Korea raised credit ceilings; Mexico issued special guarantees for public banks (World Bank 2013).
- Effectiveness limits:
  - Public bank lending has been less procyclical than private bank lending on average over the past 20 years but not in developing countries with high public debt levels.
  - Behavior differences likely reflect higher financing costs and lower government subsidies to public banks in economies with tighter budget constraints.
  - Example: BNDES (Brazil) credit surged during the global financial crisis and postcrisis recovery but declined sharply during the recession of 2014–16 partly because soaring public deficits and debt constrained government lending to public banks; rapid credit growth may have impaired loan quality.
- Sovereign-bank nexus and vulnerabilities:
  - Public banks may be used to fund the government and simultaneously receive government support, exacerbating vulnerabilities.
  - Public banks tend to hold larger amounts of sovereign debt than private banks, especially in emerging market and developing economies with higher public debt vulnerabilities.
  - During Europe’s sovereign debt crisis, domestic banks—particularly state-owned ones—were more likely to increase holdings of domestic government bonds in fiscally distressed economies, suggesting a “moral suasion” mechanism.
  - Example: In India, government guarantees allowed public banks to expand credit during the global financial crisis, with deposits moving from vulnerable private banks to “safer” public banks; subsequent deterioration in loan quality increased financial sector fragility and contingent liability risks for the government (Acharya and Kulkarni 2019).

### Evidence on SOE performance and ownership structure
- Dataset and sample:
  - Analysis uses data for about 1 million individual firms across 109 countries.
  - Of the 969,000 firms in the sample: about 949,000 are fully private, 15,000 are majority state owned, and 4,000 are minority state owned. The database includes mainly firms from advanced and emerging market economies with a smaller sample from low-income countries.
- Aggregate performance patterns:
  - A simple comparison shows profits and labor productivity are lower in SOEs than in private firms.
  - This finding is consistent with country or regional studies for China, Russia, and CESEE countries (Abramov and others 2017; Lardy 2019; Richmond and others 2019).
  - Lower productivity in SOEs can reflect the cost of public mandates (for example, below-cost prices to underserved communities or employment objectives) or genuine inefficiency; if due to inefficiency, resource misallocation can reduce economywide productivity (Song, Storesleten, and Zilibotti 2011).
- Role of sector and ownership:
  - SOEs are less productive than private firms within the same sectors; the productivity gap tends to be larger in sectors with more competition (for example, agriculture and manufacturing) and smaller in some regulated sectors (such as utilities).
  - Mixed ownership matters: private owners emphasize profits and efficiency; listed mixed-ownership enterprises face greater monitoring by private investors and analysts.
  - Empirical result: firm productivity is lowest when the government has a majority position—private firms are three times more productive—but the gap is narrower when the government has a minority position.
- Definitions and thresholds used in analyses:
  - Public banks are defined as banks with over 25 percent of equity owned by the government.
  - Countries with high public debt are those above the 75th percentile of the distribution across the whole sample, roughly corresponding to 100 percent of GDP for AEs and 60 percent of GDP for EMDEs.

*International Monetary Fund | April 2020*

### 1. Profits and Costs

### 1. Profits and Costs

### SOEs’ Relative Performance
- SOEs exhibit sizable gaps relative to private firms across profitability, productivity, and labor costs.  
- In countries with high perceived corruption, SOEs are "one-third as productive as private firms, on average"; in countries with strong governance, the productivity gap is 7 percent.  
- The gap in profitability remains significant even with good governance: a difference of 4 percentage points in return on equity between SOEs and private firms in countries with good governance scores.  
- Data periods and definitions cited: SOEs are firms with 50 to 100 percent public sector ownership; sales per employee for productivity are based on 2017 prices; data are from 1999 to 2017 (figures and regressions use 1999–2017).

### Fiscal Costs and Risks to the Government
- Governments have provided substantial support to SOEs historically:
  - Maximum annual support to financial SOEs reached 18 percent of GDP.
  - Maximum annual support to nonfinancial SOEs reached 16 percent of GDP.
- Country examples of large fiscal support:
  - Eskom (South Africa) is receiving a rolling government bailout of 2⅓ percent of GDP over three years.
  - Belarus: the government provided on average 1½ percent of GDP in subsidies and about 2 percent of GDP in additional off-budget support.
  - Italy’s national airline has received large loans or transfers and was under bankruptcy protection.
  - Alitalia: privatized in 2009, minority stake taken in 2014, special administration in 2017, reincorporated as a public holding in 2020.
- SOE debt vulnerability:
  - In some countries, SOE debt exceeds 20 percent of GDP; in several cases SOE liabilities constitute half or more of the public sector debt stock.
  - In some countries, SOE external debt exceeds 25 percent of the countries’ exports of goods and services.
- Realized SOE risks can have multiplier effects across the economy:
  - Public bank distress can curtail credit growth and undermine economic activity.
  - Large, impaired nonfinancial SOEs can affect employment, investment, the financial system, and competitiveness (examples: Ghana, The Gambia).

### Governance Matters
- Weak countrywide governance (control of corruption) harms all firms but disproportionately affects SOEs (Baum and others 2019).  
- As perceived governance improves, SOEs’ performance and productivity gaps relative to private firms shrink (Figure references use the Control of Corruption index from the Worldwide Governance Indicators, data from 1999–2017).  
- Sector composition matters: countries with better governance tend to have SOEs concentrated in sectors with a stronger rationale for public intervention (utilities and transportation), where SOE performance more closely matches private firms; fewer SOEs appear in sectors like manufacturing where private firms outperform SOEs.

### Evidence on Reforms and Their Effects
- Reforms studied (in IMF-supported programs) target:
  1. SOE governance (management, oversight, transparency);
  2. Public enterprise pricing (tariffs, automatic fuel price mechanisms);
  3. Arrears clearance;
  4. Achievement of specific financial targets.
- Estimated impacts of reforms (2002–17):
  - Governance and pricing reforms improve financial variables across most sectors except mining.
  - Example quantitative impacts: an implemented governance reform associated with an increase in productivity of $10,000 per worker and a reduction of costs of 5 percent in the electricity sector.
  - Arrears clearance and financial target-setting show weaker or no impact when implemented without broader structural reforms.
- Country reform examples:
  - Jordan: Subsidies to NEPCO were close to 6 percent of GDP in 2014 (for context, total health spending was 7.5 percent of GDP that year). Reforms included gradual tariff adjustments since 2012 and installation of a liquefied natural gas plant; vulnerable households received increased cash transfers. Public transfers to NEPCO were eliminated as of 2015; NEPCO posted small positive or negative net operational balances since 2016.
  - Ukraine: Naftogaz turned from loss-making with significant budget aid to profitable within a few years following gas and heating price increases, restructuring, and governance reforms as of 2014, accompanied by extension of utility subsidy programs for vulnerable households.
- Reform design takeaway: governance and pricing reforms delivered the largest improvements; reform packages need to be sequenced and sustained, with protections for vulnerable households.

### How to Get the Most Out of SOEs — Policy Implications
- Regularly review the rationale for each SOE and use SOEs selectively—stronger case for SOEs in sectors with universal service and affordability objectives (public utilities, ground transportation); weaker case in competitive sectors where private firms are more efficient.
- Strengthen links between SOEs and public sector goals by improving oversight, incentives, and governance institutions; examples of strong frameworks include Nordic countries (referenced).
- Fiscal transparency and integration:
  - Fully integrate SOE financial operations, assets, and liabilities into public sector financial statements via a public sector balance sheet approach where feasible (examples: Australia, New Zealand, United Kingdom).
  - Where full integration is not yet feasible, publish memorandums summarizing government guarantees to SOEs and follow recommended SOE financial disclosure practices.
  - Preferably include nonfinancial SOEs in fiscal targets, especially those that pose significant fiscal risks and where the government is a majority shareholder; at minimum, include SOE debt in public sector debt when the SOE poses a fiscal risk.
  - Public banks are generally better kept outside fiscal targets given their operations, but their performance should be closely tracked.

### Getting Firm-Level Incentives Right
- Pricing policy:
  - Pricing rules should be transparent and depoliticized (for example, published automatic domestic fuel price adjustment rules).
  - Prices should preferably ensure cost recovery (including investment) while protecting vulnerable households; for sectors with negative externalities (for example, fossil fuels) pricing should be adjusted and vulnerable households protected.
  - If cost-reflective pricing is not feasible due to widespread poverty and lack of social safety nets, governments should compensate SOEs in a timely and transparent manner.
  - Prevent excessively high prices where SOEs have monopoly power.
- Independent regulatory agencies:
  - Regulators should balance interests and ensure transparent, well-defined rules—especially important when private investors are involved.
  - In low-income countries, pooling resources in a single regulator across several sectors can help build capacity.
- Professional management and managerial independence:
  - Corporate governance structures should promote sound hiring, wage, and procurement policies, supported by a professional board and high transparency.

*Source: ch3 - 1. Profits and Costs (PDF chapter/section) — Fiscal Monitor: Policies to Support People During the COVID-19 Pandemic, April 2020*

### CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent

### CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent

### Strengthen Institutions
- Ownership policy should clearly state:
  - the mandates, objectives, and a dividend policy for SOEs;
  - the approach to achieving professional boards of directors;
  - the functions carried out by the government as owner of the SOE and its coordination with fiscal risk oversight functions;
  - the way the government exercises its ownership rights.
- Distinguish and disclose commercial and noncommercial activities (policy mandates) to assess SOEs’ effectiveness in achieving value for money.
- Governments must develop capacity to properly oversee operations while avoiding excessive intervention; enforce transparency requirements; and establish a sound SOE corporate governance framework.
- Implement anticorruption strategies to prevent use of SOEs for private gain.

### Effective Financial Oversight and Ownership
- A strong oversight and control agency can yield better performance from SOEs.
- Centralized models (autonomous agency or holding company) provide consistency between ownership and financial oversight; examples include Finland, France, Kenya, Malaysia, Peru, and Singapore.
- Holding companies exhibit advantages when managers have professional expertise and they protect SOEs from undue political interference.
- It is critical to have one government unit responsible for financial oversight of SOEs even when a holding company is in place; oversight units can be located within ministries of finance (France) or public companies (such as UK Government Investments).
- Central oversight advantages:
  - better integration of SOE risk oversight in the budget process;
  - facilitation of a broader assessment of fiscal risks.
- Core oversight functions:
  - identify, disclose, and mitigate fiscal risks at individual-company and SOE-portfolio levels;
  - assess and approve SOEs’ investment plans with technical and economic appraisals based on standardized criteria;
  - subject projects that involve direct budgetary costs (capital injections, on-lending) to a selection process consistent with medium-term fiscal objectives and fiscal risk.
- Recommended approaches to contain risks:
  - explicit no-bailout clauses (used in transition countries such as Poland and Ukraine);
  - subject SOEs to effective insolvency procedures similar to private firms (examples: Italy, Korea, the Netherlands, Sweden, and the United Kingdom);
  - provide SOE management incentives to manage risks (performance contracts and benchmarking), noting implementation difficulties.
- Regularly review SOE portfolios to assess whether state ownership remains justified; options if no longer relevant:
  - sell assets and close the firm—with appropriate protection to workers and communities—if the business plan is not viable;
  - privatize the firm if institutional preconditions are in place and the business plan is viable.
- Implementation note: IMF staff have supported development of SOE risk analysis templates in several countries during the past decade, most recently in Armenia (2015), Namibia (2018), and Serbia (2019).

### Transparency
- Financial and operational performance and financial relations between SOEs and the government must be disclosed to reduce off-budget spending, borrowing, political patronage, or corruption.
- Disclosure practices:
  - advanced economies: disclosure of SOE financial statements is prevailing practice;
  - emerging market economies: disclosure often restricted to listed SOEs.
- SOE financial statements should be audited by the national audit office or private audit firms approved by the national audit office.
- Examples of reporting and publication:
  - Finland, France, Ireland, New Zealand, and Sweden publish performance assessments of at least their largest SOEs.
  - India, Paraguay, the Philippines, and Sweden publish aggregate SOE sector reports.
  - Brazil, Ghana, India, Korea, and Sweden provide information at the individual SOE level.
- SOE financial data should be integrated into a public sector balance sheet for a comprehensive view of public finances.
- Government mandates to SOEs should be clearly defined, transparently disclosed in the budget, and compensated if needed.
- Fiscal risks associated with SOEs, including contingent liabilities, should be regularly reported; fiscal risk statements are a recommended vehicle (examples: Austria, Georgia, and the Philippines).
- South Africa: the budget review discloses the financial position and prospects of the largest loss-making nonfinancial SOEs and describes ongoing risk mitigation measures.
- Note: financial information on SOEs is sparse in many countries, especially for NOCs in the Middle East and sub-Saharan Africa; NRGI 2019 cited.

### SOE Corporate Governance
- Establish and enforce SOE corporate governance standards in line with good international practice (OECD Guidelines on Corporate Governance of SOEs (OECD 2015) cited as an example).
- Board composition:
  - promote professional boards to ensure accountability;
  - in some countries, board members are required to be independent of the government (examples: Canada, Germany, the Netherlands, and Switzerland).
- Regulation:
  - in Chile, the Netherlands, Norway, and Sweden, at least the largest SOEs are subject to the same regulatory framework as listed private companies.
- Performance assessment:
  - regularly assess SOE management performance where possible (example: New Zealand’s performance contracting framework).
- Implementing high corporate governance standards remains challenging in many low-income developing countries.

### Transition to Better Oversight and Management of SOEs
- Reforms take time and resources; low-capacity countries should adopt a risk-based and sequenced approach focusing on higher-risk SOEs.
- Three main pillars of reform (Figure 3.21):
  1. Get Started: know SOEs (collect data), record and report all transactions between government and SOEs, improve reliability and timeliness of SOE financial reporting.
  2. Build SOE Oversight Function: approve SOEs’ strategy and budget, set limits on SOE borrowing and contingent liabilities, quantify mandates, produce a fiscal risk statement or report on SOE sector.
  3. Drive Efficiency and Competitiveness: overarching SOE act and ownership policy, boards with professional members from the private sector, robust SOE performance management cycle, fund quasi-fiscal activities through the budget.
- Feasibility and speed depend on country circumstances and political economy considerations.

### Being a Good "Global Citizen"
- Growth and global activity of SOEs have led to concerns about competitive advantages and market distortions in sectors such as aluminum, semiconductors, airlines, and steel.
- SOE expansion abroad may reflect home-country goals beyond commercial objectives (control of natural resources, acquisition of technology, political or diplomatic objectives).
- Corruption and environmental concerns:
  - available data suggest SOE officials received 80 percent of total bribes in foreign bribery cases (OECD 2014).
  - SOEs in the power sector account for a substantial quantity of greenhouse gases (OECD 2018c) and NOCs can have significant environmental impacts (polluting water, abandoning oil fields without cleaning them).
- Domestic benefits of reforms:
  - well-governed, transparent, efficient SOEs support productivity growth, better use public resources, and reduce local pollution.
  - SOEs can contribute to global public goods (environmental protection, anti-corruption) if governance and anticorruption strategies improve.
- Competitive neutrality initiatives:
  - examples: EU and Australia have comprehensive approaches; Australia requires SOEs to make compensatory payments for regulatory or debt-financing advantages (OECD 2016b).
  - many advanced economies have laws and regulations addressing potential uneven treatment of SOEs and private firms (OECD 2018a).
  - sectoral and regional trade agreements include SOE-related rules to promote fair competition (examples cited: Australia–United States Free Trade Agreement; agreements between the United States and several Gulf countries; revised EU directive on airline competition; Comprehensive and Progressive Agreement for Trans-Pacific Partnership; EU-Japan EPA; USMCA).
- Proposal for multilateral principles:
  - a voluntary multilateral agreement on general principles (akin to the Santiago Principles for sovereign wealth funds) could promote transparency on mandates and government support, nondiscriminatory treatment, and common methodologies.
  - important elements to address (Figure 3.22 basics):
    - cost allocation transparency: identify which policy mandates should be compensated; agree on methodologies to allocate costs between commercial and noncommercial activities;
    - debt neutrality: assess the value of an implicit government guarantee;
    - return adequacy: set appropriate benchmarks for assessing return adequacy;
    - value of captive home markets and in-kind benefits (free land) should be valued;
    - ensure similar tax, regulatory, and procurement rules; require compensatory payments if SOE cost of capital is lower than benchmark.

### Conclusion
- SOEs have major economic and fiscal effects and are among the largest companies globally; they can be global players.
- Many SOEs have low productivity, distort competition, and can be plagued by corruption.
- In developing countries, SOEs have often fallen short in providing basic services (safe water, sanitation, reliable electricity) to the entire population.
- SOEs have been significant drains on government budgets and in some cases contributed to economic and fiscal crises.
- Addressing governance, transparency, oversight, and competitive neutrality concerns can deliver domestic and global benefits.

*Source: CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent, April 2020, International Monetary Fund.*

### CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent

### CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent

### Role and policy challenge of SOEs
- SOEs provide core economic services and could be an important vehicle for achieving the Sustainable Development Goals.
- The model for using and managing SOEs should be strengthened in many countries.
- Governments should not waste public resources in areas where intervention is not needed; the case for SOEs is weak when markets are competitive and private firms provide goods and services efficiently.
- Where SOEs play a dominant role, such as public utilities, improving their performance and achieving a sustainable business model are priorities.
- Governments will need to find ways to attract private investment to complement the activities of SOEs, which are unlikely to be able to satisfy all development goals.
- In view of the growing presence of SOEs in global trade and investment, ensuring a level competitive playing field is important to foster economic efficiency at home and to address international spillovers.
- There is room for a more coordinated international approach that could benefit from setting global principles for multinational SOEs.

### Governance, oversight, and transparency
- Governments need to set appropriate incentives and build sound institutions to ensure SOEs operate efficiently and fiscal costs are contained.
- A strong framework would include:
  - a clear and comprehensive ownership policy supported by appropriate government oversight;
  - good corporate governance;
  - transparency of SOE activities and their relations with the government to bolster accountability.

### Privatization: evidence, risks, and preconditions
- Empirical findings on privatization:
  - Privatization, done right, can mean improved firm performance, healthier public finances, and positive macroeconomic effects.
  - The literature suggests that privatized firms outperform SOEs but underperform firms that have always been in private hands.
  - Privatization has disappointed when complementary institutional and market reforms, as well as equity goals, are not pursued with equal vigor.
  - Examples of poor outcomes include rapid mass privatization in Russia and Ukraine within weak governance and regulation, which often led to bid rigging and limited efficiency improvements.
  - Estache and Trujillo (2008) find significant productivity gains after pre-2000 privatization in Latin American countries but point to employment loss and unequal distribution of privatization rents, especially for noncompetitive activities.
  - Privatization reversals are common where regulation is not effective (examples: Dominican Republic, the Indian state of Odisha, and some African countries for the power sector).
  - Sector-specific dynamics matter: water supply privatization in Guinea increased access by 10 percent from 1986 to 1997 but made the price of water 40 times more expensive; privatization was reversed in 2003.
  - In California in the 1990s, electricity generation privatization led to problems including a hike in electricity prices.
  - Despite concerns, privatization can lead to employment gains even if employment and wages in the former state firm fall; after Zambia Airways was liquidated, two new private airlines emerged, leading to higher employment in the sector.
  - McKenzie and Mookherjee (2003) find that utility prices, on average, fell by 50 percent in some Latin American countries after privatization, and in countries where prices rose, access to previously unavailable goods and services did too.
- Preconditions required to realize benefits of privatization:
  - a solid regulatory framework, including a well-functioning legal system;
  - an effective and independent regulator;
  - strong property rights;
  - relatively low levels of corruption to permit a transparent sale process and prevent embezzlement of SOE assets in the run-up to privatization;
  - sufficient competition in the underlying market or an independent regulator at the onset of privatization;
  - low barriers to new domestic firm entry and openness to foreign direct investment to remedy markets with too few bidders for auctioned firms.

### Public banks: objectives, performance, and evidence
- Public banks comprise two broad categories:
  - commercial banks, which provide competitive banking services; and
  - development banks, which provide credit for development-related projects, usually at subsidized rates, with funding coming from the budget or with government guarantees.
- Common stated objectives of public banks:
  - finance socially valuable but financially unattractive or highly risky projects (for example, lending to young, small, and innovative firms);
  - finance capital-intensive infrastructure projects.
- Empirical evidence and concerns:
  - Studies have shown that greater state ownership of banks is associated with lower levels of financial development, weaker economic growth, and higher financial instability.
  - There is concern that the state presence politicizes credit allocation (including lending to connected entities or other SOEs); example: politically motivated lending in Ukraine’s state-owned banks led to massive losses and repeated recapitalizations by the state.
  - Public banks can play a positive role in some cases (example: Mexico’s NAFIN is credited for fostering financial development, innovation, and inclusion).
- Financial performance evidence:
  - Public commercial banks operating in developing economies tend to have lower profitability and interest margins, higher overhead costs, and higher nonperforming loans than private banks; no significant performance differences are found in advanced economies in some studies.
  - A sample of more than 4,000 banks in 125 countries over the past two decades shows that public commercial banks are less profitable and cost-efficient than their private counterparts, not even accounting for the substantial guarantees, subsidies, and preferential treatment that public banks enjoy.
  - Comparing the decades before and after the global financial crisis, the findings suggest that the performance differences have narrowed between public and private commercial banks in emerging market and developing economies but widened in advanced economies (period labels in analysis: 1999–2007 and 2010–18).
  - Hypotheses offered:
    - For emerging market and developing economies, greater government support for public commercial banks after the global financial crisis boosted their profitability.
    - For advanced economies, the ultra-loose monetary policy after the crisis tended to have a disproportionate effect on public commercial banks because they lend more locally than their private peers.

*Italic: Source: CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent (PDF), International Monetary Fund, April 2020.*

### CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent

### CHAPTER 3 State-Owned enterprISeS: the Other GOvernMent

### Major themes covered by the cited literature
- Privatization outcomes and labor impacts
  - “Effect of Institutional and Firm Specific Characteristics on Post-Privatization Performance.” Journal of Corporate Finance 11 (5): 747–66.
  - “Impact of Privatization on Employment and Earnings.” IZA World of Labor.
  - Megginson, M., and J. Netter. 2001. “From State to Market: A Survey of Empirical Studies on Privatization.” Journal of Economic Literature 39 (2): 321–89.
  - Sheshinski, E., and L. F. López-Calva. 2003. “Privatization and Its Benefits: Theory and Evidence.” CESifo Economic Studies 49 (3): 429–59.
  - Hanousek, J. E. Kocenda, and J. Svejnar. 2008. “Privatization in Central and Eastern Europe and the Commonwealth of Independent States.” In Privatization: Successes and Failures, 76–108.

- SOE governance, corporate governance, and anti-corruption
  - OECD. 2015. OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition.
  - Rosen, D., W. Leutert, and S. Guo. 2019. “Missing Link: Corporate Governance in China’s State Sector.” Asia Society Special Report with Rhodium Group.
  - OECD. 2018b. State-Owned Enterprises and Corruption: What Are the Risks and What Can Be Done?
  - Wilkinson, P. 2017. “10 Anti-Corruption Principles for State-Owned Enterprises: A Multi-Stakeholder Initiative of Transparency International.”

- Fiscal risks, public investment, and macro-fiscal implications of SOEs
  - Davis, J., R. Ossowski, T. Richardson, and S. Barnett. 2000. “Fiscal and Macroeconomic Impact of Privatization.” IMF Occasional Paper 194.
  - IMF. 2005. “Public Investment and Fiscal Policy—Summaries of the Pilot Country Studies.” IMF Policy Paper 05/119.
  - IMF. 2007. “Public Enterprises and Fiscal Risk—Lessons from the Pilot II Country Studies.” IMF Policy Paper.
  - Ter-Minassian, T. 2017. “Identifying and Mitigating Fiscal Risks from State-Owned Enterprises (SOEs).” IADB Discussion Paper 546.

- State ownership in the financial sector, banks, and sovereign-bank nexus
  - La Porta, R., F. Lopez-de-Silanes, and A. Shleifer. 2002. “Government Ownership of Banks.” Journal of Finance 57 (1): 265–301.
  - Farazi, S., E. Feyen, and R. Rocha. 2013. “Bank Ownership and Performance in the Middle East and North Africa Region.” Review of Middle East Economics and Finance 9 (2): 159–96.
  - Dell’Ariccia, G., C. Ferreira, N. Jenkinson, L. Laeven, A. Martin, C. Minoiu, and A. Popov. 2018. “Managing the Sovereign-Bank Nexus.” IMF Departmental Paper 18/16.
  - Igan, D., H. Moussawi, A. Tieman, A. Zdzienicka, G. Dell’Ariccia, and P. Mauro. 2019. “The Long Shadow of the Global Financial Crisis: Public Interventions in the Financial Sector.” IMF Working Paper 19/164.

- Sectoral reform and regulation: water, electricity, transport, telecommunications, natural resources
  - Zhang, Y.-F., D. Parker, and C. Kirkpatrick. 2008. “Electricity Sector Reform in Developing Countries: An Econometric Assessment of the Effects of Privatization, Competition and Regulation.” Journal of Regulatory Economics 33 (2): 159–78.
  - Foster, V., and A. Rana. 2020. “Rethinking Power Sector Reform in the Developing World.” World Bank.
  - Gomez-Lobo, A. 2012. “The Ups and Downs of a Public Transport Reform: The Case of Transantiago.” Documentos de Trabajo Universidad de Chile, 354.
  - Gasmi, F., A. A. Maingard, P. P. Noumba Um, and L. R. Virto. 2013. “The Privatization of the Fixed-Line Telecommunications Operator in OECD, Latin America, Asia, and Africa: One Size Does Not Fit All.” World Development 45: 189–208.
  - Pérard, E. 2009. “Water Supply: Public or Private?” Policy and Society 27 (3): 193–219.
  - Natural Resource Governance Institute (NRGI). 2019. National Oil Company Database.

- Comparative international practices, measurement, and trade effects of SOEs
  - OECD. 2017. The Size and Sectoral Distribution of State-Owned Enterprises.
  - Kowalski, P., M. Buge, M. Sztajerowska, and M. Egeland. 2013. “State-Owned Enterprises: Trade Effects and Policy Implications.” OECD Trade Policy Paper 147.
  - OECD. 2019a. “Measuring Distortions in International Markets: The Aluminium Value Chain.” OECD Trade Policy Paper 218.
  - OECD. 2019b. “Measuring Distortions in International Markets: The Semiconductor Value Chain.” OECD Trade Policy Paper 234.

- Country and regional case studies: China, Latin America, Africa, Central and Eastern Europe
  - Hsieh, C. T., and Z. Song. 2015. “Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China.” NBER Working Paper 21006.
  - Lardy, N. 2019. “The State Strikes Back: The End of Economic Reform in China?” Peterson Institute for International Economics.
  - Musacchio, A., and S. Lazzarini. 2014. Reinventing State Capitalism: Leviathan in Business, Brazil, and Beyond.
  - Musacchio, A., and E. I. Pineda Ayerbe. 2019. Fixing State-Owned Enterprises in Latin America: Old Problems, New Solutions.
  - Nellis, J. 2008. “Privatization in Africa. What Has Happened? What Is to Be Done?” In Privatization: Successes and Failures, 109–135.
  - Richmond, C. J., D. Benedek, E. Cabezon, B. Cegar, P. Dohlman, M. Hassine, B. Jajko, and others. 2019. “Reassessing the Role of State-Owned Enterprises in Central, Eastern, and Southeastern Europe.” European Departmental Paper Series 19/11.

- Methodology, data construction, and econometric approaches relevant to SOE research
  - Kalemli-Ozcan, S., B. Sorensen, C. Villegas-Sanchez, V. Volosovych, and S. Yesiltas. 2015. “How to Construct Nationally Representative Firm-Level Data from the Orbis Global Database.” NBER Working Paper 21558.
  - Pesaran, H., and Q. Zhou. 2018. “Estimation of Time-Invariant Effects in Static Panel Data Models.” Econometric Reviews 37 (10): 1137–71.
  - Kripfganz, S., and C. Schwarz. 2019. “Estimation of Linear Dynamic Panel Data Models with Time-Invariant Regressors.” Journal of Applied Econometrics 34 (4): 526–46.
  - Hsiao, C. H. 2003. Analysis of Panel Data. Cambridge University Press.

### Representative policy and reform directions emphasized by the literature
- Strengthen corporate governance frameworks for SOEs, drawing on OECD Guidelines and anti-corruption principles.
- Identify and mitigate fiscal risks from SOEs through enhanced reporting, balance-sheet scrutiny, and IMF/IADB recommendations.
- Tailor privatization and reform approaches to sectoral and country-specific contexts; “One Size Does Not Fit All.”
- Reassess state presence in banking and financial sectors to manage sovereign-bank nexus and financial stability risks.
- Improve measurement and transparency of SOE activities and quasi-fiscal operations to inform macro-fiscal policy.
- Promote competition and regulatory reform in network industries while safeguarding service delivery and social outcomes.

*References for the chapter’s bibliography as listed in the source PDF.*

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_Source: https://www.imf.org/-/media/files/publications/fiscal-monitor/2020/april/english/ch3.pdf_