A state-owned enterprise (SOE) is a legal entity that undertakes commercial activities on behalf of the state, its owner. The legal status of SOEs varies from being a part of the government to being stock companies with the state as a regular stockholder. The defining characteristics of SOEs are that they have a distinct legal form and are established to operate in commercial affairs and commercial activities. While they may also have public policy objectives (e.g., a state railway company may aim to make transportation more accessible), SOEs should be differentiated from other forms of government agencies or state entities established to pursue purely nonfinancial objectives.
Contents
- Terminology
- Definitions
- Economic sectors
- Europe
- Austria
- Belgium
- Bulgaria
- The Czech Republic
- Denmark
- France
- Germany
- Hungary
- Ireland
- Italy
- Netherlands
- Poland
- Portugal
- Romania
- Serbia
- Slovenia
- Spain
- Sweden
- Switzerland
- United Kingdom
- Afghanistan
- China
- Hong Kong
- India
- Indonesia
- Japan
- Malaysia
- Philippines
- Singapore
- South Korea
- Taiwan
- Thailand
- Vietnam
- Kenya
- South Africa
- Tanzania
- Brazil
- Canada
- Government sponsored enterprises
- Federal government chartered and owned corporations
- Federal government acquired corporations
- Other types in the United States
- Uruguay
- Australia
- Australian Government
- Australian Capital Territory
- New South Wales
- Northern Territory
- Queensland
- South Australia
- Tasmania
- Victoria
- Western Australia
- New Zealand
- Summary
- References
Government-owned corporations are common with natural monopolies and infrastructure, such as railways and telecommunications, strategic goods and services (mail, weapons), natural resources and energy, politically sensitive business, broadcasting, demerit goods (e.g. alcoholic beverages), and merit goods (healthcare).
Terminology
SOEs are also called state-owned company, state-owned entity, state enterprise, publicly owned corporation, government business enterprise, crown corporation, government-owned corporation, government-sponsored enterprises, commercial government agency, public sector undertaking, or parastatal.
Definitions
SOEs can be fully owned or partially owned by government. As a definitional issue, it is difficult to determine categorically what level of state ownership would qualify an entity to be considered as state-owned since governments can also own regular stock, without implying any special interference. As an example, the China Investment Corporation agreed in 2007 to acquire a 10% interest in the global investment bank Morgan Stanley, but it is unlikely that it would qualify the latter as a government-owned corporation. Government-owned or state-run enterprises are often the result of corporatization, a process in which government agencies and departments are re-organized as semiautonomous corporate entities, sometimes with partial shares listed on stock exchanges.
The term 'government-linked company' (GLC) is sometimes used to refer to corporate entities that may be private or public (listed on a stock exchange) where an existing government owns a stake using a holding company. There are two main definitions of GLCs are dependent on the proportion of the corporate entity a government owns. One definition purports that a company is classified as a GLC if a government owns an effective controlling interest (more than 50%), while the second definition suggests that any corporate entity that has a government as a shareholder is a GLC.
In the Commonwealth realms, particularly Australia, Canada, New Zealand, and the United Kingdom, country-wide SOEs often use the style "Crown corporation", or "Crown entities". Examples of Crown corporations include the Canadian Broadcasting Corporation and Air Canada before the latter underwent privatization. Cabinet ministers (ministers of the Crown) often control the shares in such public corporations.
At the level of local government, territorial or other authorities may set up similar enterprises which are sometimes referred to as "local authority trading enterprises" (LATEs). Many local authorities establish services, such as water supply as separate corporations or as a business unit of the authority.
Economic sectors
SOEs often operate in sectors in which there is a natural monopoly, or the government has a strategic interest. However, government ownership of industry corporations is common.
Nationalization also forcibly converts a private corporation into a state-owned enterprise.
In most OPEC countries, the governments own the oil companies operating on their soil. A notable example is the Saudi national oil company, Saudi Aramco, which the Saudi government bought in 1988, changing its name from Arabian American Oil Company to Saudi Arabian Oil Company. The Saudi government also owns and operates Saudi Arabian Airlines, and owns 70% of SABIC as well as many other companies. They are, however, being privatized gradually.
Europe
In Western Europe and Eastern Europe there was a massive nationalization throughout the 20th century, especially after World War II. In Eastern Europe, governments dominated by Communists adopted the Soviet model. Governments in Western Europe, both left and right of centre, saw state intervention as necessary to rebuild economies shattered by war. Government control over so-called natural monopolies like industry was the norm. Typical sectors included telecommunications, power, petroleum, railways, airports, airlines, public transport, health care, postal services and sometimes banks. Many large industrial corporations were also nationalized or created as Government corporations, including among many British Steel Corporation, Statoil and Irish Sugar. Starting in the late 1970s and accelerating through the 1980s and 1990s many of these corporations were privatized, though many still remain wholly or partially owned by the respective governments.
A state-run enterprise needs to be distinguished from an ordinary limited liability corporation owned by the state. For example, in Finland, state-run enterprises (liikelaitos) are governed by a separate act. Even though responsible for their own finances, they cannot be declared bankrupt; the state answers for the liabilities. Stocks of the corporation are not sold and loans have to be government-approved, as they are government liabilities. In contrast, the state also owns controlling interest in ordinary limited liability corporations. A state-run enterprise is technically not always a corporation, it might also be a separate state entity, or simply a governmental agency acting as an enterprise, perhaps having its own budget. Conversely, the state can directly fund unprofitable business, such as railway services to remote areas, regardless of whether the operator is a private corporation.
Austria
Belgium
Region of Wallonia owns the:
Bulgaria
The Czech Republic
Denmark
France
The Fonds stratégique d'investissement, a sovereign wealth fund initiated by Nicolas Sarkozy in October 2008 at the height of the Dexia crisis, holds capital in approximately 50 firms, which are listed in the French wiki.
One significant piece of legislation in 2013 of the Hollande government is that for the constitution of the Banque Publique d'Investissement which has a mandate to encourage a German-patterned Mittelstand-like climate for France. The former partner of Hollande, Ségolène Royal, was appointed to the vice-Chair directorship of the Bank, from which position she stated that the "BPI's purpose is not to do business nor to make profits".
Agence des participations de l'État (APE) is a special agency of the French government managing the state's holdings in about 70 firms, including France Telecom, Renault and Air France. It was established in 2004. Among the fully owned corporations (51% or more) of the French Republic are:
The state of France owns a minority stake in:
Germany
In the wake of the 2007 financial crisis Germany's stock of gross financial assets increased significantly, turning it into the second largest stock among OECD countries after the US.
Note that many smaller State owned enterprises are owned by individual states of Germany such as TransnetBW and Rothaus (State Brewery of Baden).
Hungary
Ireland
In Ireland state-owned enterprises are referred to as "State-sponsored bodies".
Italy
Companies owned by the Ministry of Economy and Finances
Netherlands
Poland
Portugal
Romania
Serbia
Slovenia
Slovenia is an ex-Yugoslavian republic. As such, its economy was largely state-owned prior to dissolution of that federation. The state still owns many enterprises, such as the banks, which in turn own such businesses as supermarkets and newspapers.
Spain
Sweden
Two types: Government-owned companies, which legally are normal companies but mainly or fully national owned. They are expected to be funded by their sales. A big customer might be the government or a government agency. The other type is Government agencies which might also do activities competing with private owned companies. They usually are funded by tax money but can also sell services. The government has tried to avoid having agencies doing commercial activities, by separating out areas that compete with private companies into government-owned companies, for example within road construction. The reason is both to avoid unfair competition, and a wish to have market economy instead of plan economy as much as possible. Based on the tradition of avoiding "ministerial rule", the government has avoided interfering with the business of the companies, and allowed them to go international.
Switzerland
Here is the government owned of the Swiss Confederation:
United Kingdom
After extensive privatisation of the public sector during the Margaret Thatcher administration, there remain few statutory corporations in the UK. Ongoing privatisations lasted from the end of the 1970s, through the 1980s until 1990 with the privatisation of British Rail. After the Hatfield rail crash accident, the British government decided to intervene and renationalised Railtrack (which was responsible for the maintenance of railway tracks and signals) into Network Rail. The impact of the privatisation of British Rail is much debated today, with increased passenger numbers and better safety offset by concerns about the cost to taxpayers.
Afghanistan
In 2009, the Government of the Islamic Republic of Afghanistan formed the Afghan Public Protection Force (APPF) as a "state owned enterprise" subordinate to the Ministry of the Interior. By Presidential Decree, the APPF is mandated to replace all non-diplomatic private security companies by 20 March 2013 to become the sole provider of pay-for-service security contracts within Afghanistan.
China
After 1949, all business entities in the People's Republic of China were created and owned by the government. In the late 1980s, the government began to reform the state-owned enterprise, and during the 1990s and 2000s, many mid-sized and small sized state-owned enterprises were privatized and went public. There are a number of different corporate forms which result in a mixture of public and private capital. In PRC terminology, a state-owned enterprise refers to a particular corporate form, which is increasingly being replaced by the listed company. State-owned enterprises are mostly governed by both local governments' SASAC and, in the central government, the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council. However, some state-owned enterprise were governed by China Investment Corporation (and its domestic arm Central Huijin Investment), as well as under the governance of Ministry of Education for the university-run enterprises, or some financial institutes that were under the governance of the Ministry of Finance.
As of 2011, 35% of business activity and 43% of profits in the People's Republic of China resulted from companies in which the state owned a majority interest. Critics, such as The New York Times, have alleged that China's state-owned companies are a vehicle for corruption by the families of ruling party leaders who have sometimes amassed fortunes while managing them.
Hong Kong
In the postwar years, Hong Kong's colonial government operated under a laissez-faire economic philosophy called positive non-interventionism. Hence Crown corporations did not play as significant a role in the development of the territory as in many other British territories.
The Mass Transit Railway Corporation (MTRC) was formed as a Crown corporation, mandated to operate under "prudent commercial principles", in 1975. The Kowloon-Canton Railway, operated under a government department, was corporatised in 1982 to imitate the success of MTRC (see KCR Corporation). MTRC was privatised in 2000 although the Hong Kong Government is still the majority shareholder. KCR was operationally merged with MTR in 2007.
Examples of present-day statutory bodies include the Airport Authority, responsible for running the Chek Lap Kok Airport, or the Housing Authority, which provides housing to about half of Hong Kong residents.
India
In India, a state-owned enterprise is termed a Public Sector Undertaking (PSU) or a Central Public Sector Enterprise (CPSE). These companies are owned by the Union Government, or one of the many state or territorial governments, or both. The company equity needs to be majority owned by the government to be a PSU. Few examples are Oil and Natural Gas Corporation, Engineers India Limited, India Trade Promotion Organization, GAIL, BSNL, Food Corporation of India etc.
Indonesia
state-owned enterprises, known locally as Badan Usaha Milik Negara are easy to recognise by their names. Company names with suffix PERSERO mean that the company is wholly/majority owned by the government. The government takes control of the state corporations under one single ministry, the Ministry of State Enterprises, which acts like the CEO of a holding company. Some of the government-owned corporations are;
In January 2012, the Minister of State Enterprises decided to unite manufacturing companies and for the first stage PT Barata should acquire PT Bisma to make an effective manufacturing sector.
Japan
In Japan, Japan Post was reorganized into Japan Post Group in 2007 as a material step of the postal privatization. It ceased to be wholly owned by the government on November 4, 2015 when the government listed 11% of its holdings on the Tokyo Stock Exchange. Japan Railways Group (JR), Nippon Telegraph and Telephone (NTT) and Japan Tobacco (JT) were formerly owned by the government.
Malaysia
Philippines
In the Philippines, state-owned enterprises are known as government-owned and controlled corporations. They can range from the Social Security System (SSS) and the Philippine Coconut Authority with no counterparts in the private sector to LandBank, a wholly government-owned bank that competes with private banks. A number of government-owned and controlled corporations, especially those created during the Marcos Era under his New Society program of crony capitalism, were privatized at the end of the 20th and the beginning of the 21st century, including Philippine Airlines, Philippine Long Distance Telephone Company or PLDT and Philippine National Bank.
Singapore
Government-linked corporations play a substantial role in Singapore's domestic economy. These GLCs are partially or fully owned by a state-owned investment company, Temasek Holdings. As of November 2011, the top six Singapore-listed GLCs accounted for about 17% of total capitalization of the Singapore Exchange (SGX). Notable GLCs include Singapore Airlines, SingTel, ST Engineering, and MediaCorp.
South Korea
There are many state-owned enterprises in South Korea.
Taiwan
The founding father of the Republic of China and of the Kuomintang, Sun Yat-sen, was heavily influenced by the economic ideas of Henry George, who believed that the rents extracted from natural monopolies or the usage of land belonged to the public. Sun argued for Georgism and emphasized the importance of a mixed economy, which he termed "The Principle of Minsheng" in his Three Principles of the People.
"The railroads, public utilities, canals, and forests should be nationalized, and all income from the land and mines should be in the hands of the State. With this money in hand, the State can therefore finance the social welfare programs."
Kuomintang leader, and later President of the Republic of China on the mainland and Taiwan Island, Chiang Kai-shek, crushed pro-communist worker and peasant organizations and the rich Shanghai capitalists at the same time. Chiang continued Sun Yat-sen's anti-capitalist ideology—Kuomintang media openly attacked the capitalists and capitalism, demanding government-controlled industry instead.
The Kuomintang Muslim Governor of Ningxia, Ma Hongkui promoted state-owned monopoly companies. His government had a company, Fu Ning Company, which had a monopoly over commerce and industrial activity in Ningxia.
Under the Kuomintang Muslim General Ma Bufang in Qinghai, industries and projects such as educational, medical, agricultural, and sanitation schemes were controlled by the state.
The Chinese Muslim 36th Division (National Revolutionary Army) governed southern Xinjiang from 1934 to 1937. The General Ma Hushan was chief of the 36th Division. Chinese Muslims operated state-owned carpet factories.
Corporations such as Wang Film, CSBC Corporation, Taiwan, CPC Corporation, Taiwan and Aerospace Industrial Development Corporation are owned by the state in the Republic of China.
Thailand
Here is the state-owned enterprises held by the government of the kingdom of Thailand. The Kingdom of Thailand as shareholding of 51% or more.
Vietnam
Kenya
Parastatals in Kenya, partly from a lack of expertise and endemic corruption, have largely inhibited economic development. In 1979, a presidential commission went as far as saying that they constituted "a serious threat to the economy", and, by 1989, they had still not furthered industrialization or fostered the development of a Black business class.
Several Kenyan SOEs have been privatized since the 1980s, with mixed results.
South Africa
In South Africa the Department of Public Enterprises is the shareholder representative of the South African Government with oversight responsibility for state-owned enterprises in key sectors. Some companies are not directly controlled by the Department of Public Enterprises, but by various other Departments:
The South African Government has a share in the following companies:
Various other smaller state-owned companies exist in South Africa.
Tanzania
The Government of Tanzania owns a number of commercial enterprises in the country via the Treasury Registrar. It wholly owns the following corporations unless indicated otherwise:
Brazil
State-owner enterprises are divided into public enterprises (empresa pública) and mixed-economy companies (sociedade de economia mista). The public enterprises are subdivided into two categories: individual – with its own assets and capital owned by the Union – and plural companies – whose assets are owned by multiple government agencies and the Union, which have the majority of the voting interest. Caixa Econômica Federal, Correios, Embrapa, and BNDES are examples of public enterprises. Mixed-economy companies are enterprises with the majority of stocks owned by the government, but that also have stocks owned by the private sector and usually have their shares traded on stock exchanges. Banco do Brasil, Petrobras, Sabesp, and Eletrobras are examples of mixed-economy companies.
Beginning in the 1990s, the central government of Brazil launched a privatization program inspired by the Washington Consensus. Public-owned companies such as Vale do Rio Doce, Telebrás, CSN, and Usiminas (most of them mixed-economy companies) were transferred to the private sector as part of this policy.
Brasil State Owned Companies Fact Sheet / Download here http://www.planejamento.gov.br/secretarias/upload/Arquivos/dest/perfil_empresas_estatais/2014/2015_ano_base_2014.pdf
Canada
In Canada, state-owned corporations are referred to as Crown corporations, indicating that an organization is established by law, owned by the sovereign (either in right of Canada or a province), and overseen by parliament and cabinet. Examples of federal Crown corporations include:
Ministers of the Crown often control the shares in such public corporations, while parliament both sets out the laws that create and bind Crown corporations and sets their annual budgets.
Foreign SOEs are welcome to invest in Canada: in Fall 2013, British Columbia and Alberta signed agreements overseas to promote foreign direct investment in Canada. The Investment Canada Act governs this area federally. Former Prime Minister Stephen Harper stated in 2013 that the "government [needs] to exercise its judgement" over SOEs.
Saskatchewan has maintained the largest number of Crown corporations, including
Crown corporations of British Columbia include
In Ontario:
In Quebec:
Privatization, or the selling of Crown corporations to private interests, has become common throughout Canada over the past 30 years. Petro-Canada, Canadian National Railway, and Air Canada are examples of former federal Crown corporations that have been privatized. Privatized provincial Crown corporations include Alberta Government Telephones (which merged with privately owned BC Tel to form Telus), BCRIC, Manitoba Telecom Services, Saskatchewan Oil & Gas Corporation and Potash Corporation of Saskatchewan.
Government-sponsored enterprises
Government-sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. The United States GSEs are private corporations owned by their stockholders, rather than government-owned corporations. Their primary function is to generate profits for their stockholders, but they are structured and regulated by the U.S. government to enhance the availability and reduce the cost of credit to targeted borrowing sectors. Congress created the first GSE in 1916 with the creation of the Farm Credit System; it initiated GSEs in the home finance segment of the economy with the creation of the Federal Home Loan Banks in 1932; and it targeted education when it chartered Sallie Mae in 1972 (although Congress allowed Sallie Mae to relinquish its government sponsorship and become a fully private institution via legislation in 1995). The residential mortgage borrowing segment is by far the largest of the borrowing segments in which the GSEs operate. Together, the three mortgage finance GSEs (Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks) have several trillion dollars of on-balance sheet assets. The federal government possesses warrants which, if exercised, would allow them to take a 79.9% ownership share in the companies. The federal government has not, as of December 2014, exercised these warrants.
Government sponsored enterprises include:
Federal government chartered and owned corporations
The federal government chartered and owned corporations are a separate set of corporations chartered and owned by the federal government, which operate to provide public services, but unlike the federal agencies (Environmental Protection Agency, Bureau of Indian Affairs), or the federal independent commissions (e.g., the Federal Communications Commission, the Nuclear Regulatory Commission, etc.), they have a separate legal personality from the federal government, providing the highest level of political independence. They sometimes receive federal budgetary appropriations, but some also have independent sources of revenue. These include:
Federal-government-acquired corporations
The federal-government-acquired corporations are a separate set of corporations that were originally chartered and created by an entity other than the U.S. federal government, but that were, at some point, nationalised by the federal government. Most of these are corporations temporarily in possession of the government as a result of a seizure of property of a debtor to the government, such as a delinquent taxpayer; usually, these are awaiting liquidation at auction, and most are too small to note. However, there are also corporations that the federal government has nationalised to ensure the continued provision of an essential service or services (such as the federal government's nationalisation of the Alaska Northern Railroad in 1914 and Tanana Valley Railroad in 1917, now both part of the still-federally-owned Alaska Railroad, and, on a larger scale, the nationalisation of all U.S. railroads from 1917 to 1920 under the United States Railroad Administration).
Other types in the United States
There exists a second level of sovereign government in the United States after the federal government: those of the several states of the United States. The vast majority of non-governmental corporations in the United States are chartered by the states of the United States. This includes most charitable corporations , non-profit corporations, and for-profit corporations. States also have the power to charter corporations that they own, control, or are responsible for the regulation and finance of. These include municipal corporations and state chartered and owned corporations. State government-chartered and -owned corporations are numerous and provide public services. Examples include North Dakota Mill and Elevator and South Dakota Public Broadcasting. Generally speaking, a statute passed by a state legislature specifically sets up a government-owned company in order to undertake a specific public purpose with public funds or public property. Lotteries in the United States are also run by government corporations, such as the Georgia Lottery Corporation and many others.
There also exists a third level of sovereign government in the United States: the sovereignty of the Native American tribal governments. As such, the Native American (including Alaska Native) tribal governments have the power to charter corporations and undertake public undertakings that might benefit their tribal citizens, Native Americans being not only citizens of their particular tribes, but also citizens of their respective U.S. states, and of the United States. For example, a tribal council could establish a public service broadcaster along the lines of Ireland's Raidió Teilifís Éireann, partially fund it with a television licence on tribal land, and make up the difference through advertising, thereby making it both a means of uniting the tribe and giving it a voice and a commercial venture by the tribe.
The Alaska Natives are particularly advanced in using their tribal sovereignty to incorporate corporations that are owned by and for the benefit of their tribal citizens and often compete in highly competitive economic sectors through the Alaska Native Regional Corporations. The Native American tribes in the 48 contiguous states often use their sovereignty and their ability to charter to compete using regulatory easements; for instance, Native American tribal corporations often trade in goods that are highly taxed in surrounding states (such as tobacco), or engage in activities that surrounding states have (for reasons of public policy) forbidden, such as the operation of casinos or other gaming establishments. Most of these endeavors have proven very successful for Native American tribal sovereigns and their tribal corporations, bringing wealth into the hands of Native Americans.
Uruguay
Uruguay had the first welfare state of Latin America under the presidency of José Batlle y Ordoñez in 1904. Government-owned corporations monopolize services such as electricity (UTE), land-line communications (Antel) and water (OSE). Antel competes with private corporations in the cell-phone lines and international telephony markets. In 1992, under the presidency of Luis Alberto Lacalle, the government attempted to privatize all its companies, following the neoliberal Washington Consensus. However, a referendum won by 75% of the population kept the companies in the hands of the government. By the end of his term, president Lacalle alleged that he had achieved a successful modernization of the companies, which had made them more efficient.
Australia
In Australia the predominant term used for SOEs is government business enterprise (GBE). Various Australian states also have GBEs, especially with respect to the provision of water and sewerage, and many state-based GBEs were privatized in some states during the last decade of the twentieth century. Former Commonwealth SOEs include Telstra, established in the 1970s as Telecom Australia. Telstra, now Australia's leading telecommunications company, was privatized in 1997 by the government of John Howard. As of June 2010 Telstra owned a majority of the copper wire infrastructure in Australia (the rest is owned by Optus) and is pending sale to its former parent, the Australian government, for a non-binding amount of 11 billion Australian dollars, as ducts in the copper wire tunnels are needed to install the fiber optic cable. The Commonwealth Bank, as its name indicates, was also founded as public company before later being privatized.
In Victoria many GBEs were sold in the 1990s to reduce the state's level of debt. The State Electricity Commission of Victoria and the Gas and Fuel Corporation were the best-known government enterprises to be disaggregated and sold.
Australian Government
The GBEs of the Australian Government include those listed below, some of which are overseen by the Department of Communications:
Australian Capital Territory
The GBEs of the Australian Capital Territory include:
New South Wales
The GBEs of New South Wales include:
Northern Territory
The GBEs of the Northern Territory include:
Queensland
The GBEs of Queensland include:
South Australia
South Australia is notable for having very controversially privatized most of its GBEs:
Tasmania
Tasmania has a considerable amount of GBEs, relative to other states:
Victoria
The GBEs of Victoria include:
Western Australia
The GBEs of Western Australian include:
New Zealand
New Zealanders refer to their state-owned enterprises as "state-owned enterprises", as "SOEs", or as "crown entities". Local-government councils and similar authorities also set up locally controlled enterprises, such as water-supply companies and "local-authority trading enterprises" (LATEs) as separate corporations or as business units of the councils concerned.
Government-owned businesses designated as crown entities include:
New Zealand's state-owned enterprises have included:
State-owned enterprises which have undergone privatisation and subsequent renationalisation:
Summary
In this list, government-owned corporations are classified on their legal status: silver color represents legal monopolies, and no competition is permitted; light green represents a corporation that has private competitors; yellow means that although competition is legally permitted, there are no other corporations de facto; white refers to a free market, regulated or not.