Efficient Management of State-Owned Enterprises: Challenges and Opportunities

Abstract

State-owned enterprises (SOEs) are classified as those enterprises in which the state exerts significant control through full, majority, or significant minority ownership. This definition includes SHOEs that are owned by the central or federal government as well as the ones owned by regional and local governments (Sturesson, McIntyre, and Jones 2015). Despite a wave of privatization in the last 3 decades, SOEs still contribute significantly to economic growth of both developed and developing countries (Robinett 2006). For example, SOEs account for about 30% of gross domestic product (GDP) in the People’s Republic of China (PRC), 38% in Viet Nam, 25% in India and Thailand, and about 15% in Malaysia and Singapore (OECD 2010). In 2005, they accounted for more than 50% of GDP in Tajikistan, Turkmenistan, and Uzbekistan and about 20%–40% in other Central Asian countries respectively (World Bank Group 2014a). If we include those firms in which the state owns more than 50% of their total shares, directly and indirectly, at the national or subnational level, then 10% of the world’s largest firms (204 enterprises) could be classified as SOEs with a net worth amounting to $3.6 trillion. Figure 1 details the equally weighted shares of SOEs in assets, sales, and market value of the top 10 firms in the selected countries to show which countries have the highest presence of SOEs among their firms. SOEs’ presence in rapidly developing countries such as the PRC (96%), the United Arab Emirates (88%), the Russian Federation (81%), Indonesia (69%), and Malaysia (68%) is higher compared with more developed countries such as Germany (11%) and Finland (13%) (Büge et al. 2013).