Professional Documents
Culture Documents
Dr Nick Malyshev
Head, Regulatory Policy Division
Public Governance Directorate
Organisation for Economic Co-operation and Development (OECD)
Paris
Preface
This book is the result of ideas that emerged out of observing how
the Washington Consensus, which held sway until 2007, was
challenged and submerged by the Global Financial Crisis, the
spectacular success of China, and other emerging economies which
deviated from the free-market paradigm and embraced the active
role of the State, and the role of State capitalism as a source of
cross-border finance. The focus of the book is on the state of play
and research on State capitalism and State-owned enterprises
(SOEs). It also includes factors that affected SOEs and their
performance in different countries through a country case study
approach. The country case studies used the same analytical
categories to arrive at principal common characteristics of, and
practices followed by, successful SOEs independently of country
context. While I was finishing writing the manuscript in 2020, the
COVID-19 pandemic struck and reinforced the idea that only the
State can intervene in offering holistic solutions in crisis situations
while attempting to balance a wide variety of interests.
Despite the Washington Consensus and the many economic
shocks and traumas of the 1970s through the 1990s, the State-
owned sector has remained indispensable and popular in many
countries. Experience with privatization has been mixed; in some
countries it replaced state monopolies with private ones, with worse
economic consequences. While a significant part of the State sector
and individual SOEs have worked as well as the private sector in
countries as diverse as Singapore, India, and Saudi Arabia. Well-
performing SOEs have resulted in increased acceptability of state
interventions and SOEs. These SOEs have markedly different
operations, ownership, and governance systems from their previous
archetypes. The contemporary views on SOEs have underscored how
both the private and the State sectors could work together optimally
in mixed economies that have characterized the countries chosen as
case studies, to produce the best results in different political
economy circumstances.
However, evidence suggests that a majority of SOEs misallocate
capital, mismanage resources, and are less productive than private
firms by one-third, on average. The performance of SOEs is
symptomatic of the importance accorded to SOEs and the enormity
and complexity of the challenges they face. SOEs have been
expected to act in the long-term and holistic interests of the state
and its citizens. They reallocate resources from one component of
their operations to fund others. SOEs have enjoyed significant
advantages compared to their private sector counterparts, but have
been expected to be involved in implementing and financing critical
public policies. They have been powerful tools able to restructure
sectors and guide diversity in economies and development. Private
interests with deep pockets in concert with politicians take
advantage of these opportunities to extort from SOEs. The enormity
and complexity of the demands made on SOEs have left them
yearning for clarity that the profit maximization motive provides their
private sector counterparts.
The separation between the State’s roles as shareholder, policy-
maker, and regulator has been laid down in an inconsistent and
incoherent fashion in many countries. The uneven regulatory policy
framework without an overarching guiding principle to state
regulation is responsible for distortions in the market. The
operational functioning of regulatory bodies has also been a
constraint in creating a level playing field in terms of ensuring a
competitive and fair business environment. The resultant regulatory
capture by private near-monopolies has led to rising market
concentration with existing competitors faced with extreme financial
distress and overwhelmed to provide any meaningful competition.
What is incongruous to grasp is that while the State is accorded a
very important role in the economy, it chooses to exercise its power
to the detriment of State capitalism. The global public health crisis
has yet again highlighted the need for more state productive
capacity, government procurement capabilities, symbiotic public–
private collaborations, and therefore, the continued relevance and
use of SOEs. It is, then, imperative that there is a new paradigm to
account for SOEs and reconceive the role of the State as viable
policy tools. It is equally important to acknowledge that there are
few other alternative policy means with the same puissance of SOEs
in certain circumstances. These circumstances include state’s
intervention role that are indispensable in extremis, and the role that
the State plays in fostering innovation, along with the private sector.
This book provides a comparative mapping of the role of SOEs,
their performance, and the challenges they face in eight economies.
It has explored across diverse national circumstances the factors
that influence the performance of SOEs and has drawn some
conclusions on the necessary conditions for SOEs to play a
meaningful role. These have already formed a key input in many
national reform processes and I hope that they continue to inspire
reform-minded policy makers and officials in other countries.
Although implementing the demands of the State will remain the
main rationale of all the SOEs, inefficient and ineffective SOEs are no
longer publicly acceptable. SOEs no longer exist to provide jobs and
to locate factories in underdeveloped areas of a country. SOEs need
to revitalize their role as strategic, long-term, and mission-oriented
investors (especially in healthcare, research, and education) in order
to shape and grow economies and to bring about long-term benefits
to their citizens.
Acknowledgements
Many thanks to all whose work, research, data, and support helped
me write this book. I would like to especially thank Mr Percy Mistry
who took time out to, discuss the analytical framework, provide
constructive feedback on each chapter, push me to find more data
and read my manuscript twice.
I take this opportunity to thank my friends at the OECD for their
support and encouraging words and to Mr Nick Malyshev for writing
the foreword.
Lastly, the confinement of 2020 played the most effective role in
stopping me from getting distracted and allowing me to focus on the
manuscript!
Contents
List of illustrations
List of abbreviations
1. Introduction
The influence of the 1980s Washington Consensus, the 2008–
10 Global Financial Crisis, and the COVID-19 pandemic on
State ownership
The ‘China Effect’ on State capitalism and the developmental
State
Post-2012 rethink about State capitalism
State capitalism and its different instruments
Size, nature, and sectoral distribution of the State-owned sector
Why do States own enterprises at all?
Structure of the book
2. A framework for understanding and evaluating SOE
performance
State-owned banks and financial institutions (SOBFIs) as the
central pillars of State capitalism
State ownership of enterprises and the regulatory state
Crony capitalism under State capitalism
The private agenda of public officials
The impact of State ownership on productivity and the
allocation of resources
Challenges confronting the internal management of SOEs
Conflicts that arise in the State’s primary role vs its ownership
of enterprises
3. Country case study 1: Brazil
SOEs in Brazil
The history of SOEs in Brazil
Regulation vs public ownership of SOEs
SOEs and the emergence/impact of crony capitalism
The private agenda of public officials
SOEs and the misallocation of resources
Performance of SOEs and their corporate governance
Conflicts that arise in the State’s primary role vs its ownership
of enterprises
Conclusions
4. Country case study 2: China
Contours of SOEs in China
Regulation and ownership issues in SOEs
Communist Party officials, government bureaucrats, and crony
capitalism
The private agenda of public officials
SOEs and the misallocation of resources
Internal governance and management of SOEs
Conflicts that arise in the State’s primary role vs its ownership
of enterprises
Conclusions
5. Country case study 3: India
The origins, emergence, and significance of SOEs in India
A paradigmatic change in 1991
From ownership to regulation
Crony capitalism
Private interests of public officials
Misallocation of resources and SOE productivity
Internal Management and post-reform performance of SOEs
Conflicts that arise in the State’s primary role vs its ownership
of enterprises
Conclusions
6. Country case study 4: Indonesia
SOEs in Indonesia
Regulation vs public ownership of SOEs
SOEs and crony capitalism
The private agenda of public officials
SOEs and the misallocation of resources
The performance of Indonesian SOEs
Conflicts that arise in the State’s primary role vs its ownership
of enterprises
Conclusions
7. Country case study 5: Russia
SOEs in Russia
Privatization in Russia
Regulation and State ownership of enterprises
Crony capitalism vis-à-vis SOEs as it has evolved in the Putin
Era
The private agenda of public officials
The misallocation of resources in and by SOEs
Challenges confronting the internal management of SOEs
Conflicts that arise in the State’s primary role vs its ownership
of enterprises
Conclusions
8. Country case study 6: Saudi Arabia
SOEs in Saudi Arabia
Ownership vs regulation
Saudi Arabian style crony capitalism
The private agenda of public officials
SOEs and the possible misallocation of resources
Performance of SOEs
State ownership of enterprises and its other responsibilities
Conclusions
9. Country case study 7: Singapore
The origins of State capitalism and SOEs in Singapore
The roles of EDB, DBS, Temasek, and GIC in Singapore’s
economic development
Regulation vs public ownership of SOEs
Crony capitalism
The private agenda of public officials
The allocation and use of capital resources through Temasek
and GIC
Performance of GLCs
Ownership vs other state responsibilities
Conclusions
10. Country case study 8: South Africa
The historical context of State involvement in the South African
economy
The evolution of State capitalism and South African SOEs since
1920
Attempts at privatization and their subsequent reversal
Regulation vs public ownership of SOEs
Crony capitalism
The private agenda of public officials
Allocation of resources
Performance of South Africa’s SOEs
Ownership vs other functions of the State
Conclusions
11. Conclusions from a review of SOEs in the country case studies
SOEs and the issue of conflicts of interest arising with
regulation
SOEs and crony capitalism
Exercising the private agenda of public officials
SOEs and the misallocation of resources
SOEs and State’s other responsibilities
Evaluating the performance of SOEs in all the countries studied
Bibliography
Index
Illustrations
Figures
1.1 Number of SOEs across the world
1.2 The share of SOE assets among the world’s 2000 largest firms
1.3 The share of SOE assets by sector
1.4 Share of SOEs among countries’ top 10 firms (%)
2.1 SOBFI’s share of banking system assets (%)
2.2 SOEs’ performance relative to private firms
2.3 Relative performance of SOEs by sector
2.4 SOEs’ debt and revenue of largest firms (%)
3.1 Brazilian SOEs’ and SOBFIs’ balance sheets, 2014 (as % of
GDP)
3.2 Brazilian SOEs’ gross liabilities as compared to select countries
(as % of GDP)
4.1 Central vs provincial SOEs in Chinese economy (%)
4.2 Contribution of central SOEs to the Chinese economy (%)
4.3 Sector-wise SOE investment in China (%)
4.4 SOE performance in China
4.5 RoA of Chinese SOEs and the private sector
4.6 Dividends paid to the government by central SOEs
4.7 RoE of Chinese SOEs
4.8 China NPL ratio
4.9 Cost of capital and return on capital in China
5.1 Accumulated investment of CPSEs
5.2 NPL ratio of Indian PSBs
5.3 Total income of Ratna category CPSEs
5.4 Net worth of Ratna category CPSEs
5.5 Growth in profit after tax (PAT) of Ratna category CPSEs
5.6 Total income of all CPSEs
5.7 Net profit of all CPSEs
6.1 Classification of Indonesian SOEs by Industry
6.2 Ownership of Indonesian SOEs
6.3 SOEs assets and turnover ratio
7.1 Performance of Russian SOEs compared to the private sector
8.1 Sectoral distribution of SOEs in the Saudi PIF portfolio (2015,
by value)
9.1 TSR of Temasek
9.2 Temasek’s net portfolio value in S$bn
10.1 Electricity tariffs in selected countries (2019)
10.2 Total assets of South African SOEs and their net profits (2018–
19)
10.3 South African SOEs’ RoE
10.4 South African SOEs’ cash flows
10.5 South African SOEs’ debt
Tables
1.1 Number and share of SOEs in the Fortune Global 500 list
1.2 SOEs from developed and emerging economies in the Fortune
Global 500 list
1.3 Area of activity of SOEs in the Fortune Global 500 list
1.4 Predominance of Chinese SOEs in the Fortune Global 500 list (in
parentheses %)
1.5 SOEs in country case studies
1.6 Performance of SOEs in country case studies
2.1 Non-performing loan ratio (%)
3.1 Brazil—Public corporations and finances, 2014 (in % of GDP)
4.1 Classification of SOEs in China
5.1 Key indicators of CPSEs
5.2 Performance of CPSEs
5.3 Number of loss-making and profit-making SOEs in India
7.1 Number of SOEs in Russia
8.1 Saudi PIF listed shareholdings
9.1 Singapore GLCs
Abbreviations
Nemen wij als een enkel voorbeeld om aan te toonen hoe zeer de
oude, volledige namen heden ten dage in Friesland verbasterd zijn,
den naam E k e in behandeling. E k e , zoo heeten eenige mij
bekende Friezinnen, althans zoo worden zij in het dagelijksche leven
genoemd. Eene enkele staat ook werkelijk in de kerk en ten
gemeentehuize als E k e geboekt. In den regel echter, die E k e
genoemd worden, staan als E e l k j e te boek. E k e ! korter kan het
niet! Want dat ke is slechts een aanhangsel dat den verkleinvorm
maakt; lam of laem, bij voorbeeld, wordt lamke, lammetje, in het
Friesch. Neemt men dat aangehangene ke weg, dan blijft er van den
naam E k e anders niet over als eene enkele E. Is dat nu een naam,
een eigene Friesche naam? Wel neen! E k e is een vleivorm, een
poppenamme van E e l k j e , dat weet men nog. En de naam
E e l k j e is op zijn beurt weêr een verkleinvorm, door achtervoeging
van het aanhangsel je, van den mansnaam E e l k e . Zoo maakt
men, door ze den verkleinvorm te geven, vrouwennamen van
mansnamen: P y t t s j e , (P i e t j e ) van P i e t (P i e t e r , P e t r u s ),
B a u k j e van B a u k e (B a v o ), enz. Met E e l k e zijn wij
intusschen nog lang niet waar wij wezen moeten. Immers de
mansnaam E e l k e is op zich zelven ook weêr een verkleinvorm,
door achtervoeging van ke gemaakt. De Friezen toch, hierin
onderscheiden van andere Germaansche volken, die slechts hunnen
knapen, zoo lang ze nog kleine kinderkens zijn, met verkleinnamen
noemen—de Friezen hielden en houden die namen in
verkleinvormen ook in gebruik als de kinderen tot knapen en
jongelingen, zelfs tot mannen zijn opgegroeid. Nevens E e l k e staat
E e l t j e , het eerste met den Frieschen, het laatste met den
Hollandschen verkleinvorm; beide mansnamen beteekenen het
zelfde, beiden zijn het verkleiningsvormen van E l e . In der daad
worden zij, die E e l k e of E e l t j e heeten, in den dagelijkschen
omgang dan ook wel E l e , genoemd. Maar met E l e zijn wij [219]ook
nog niet tot den oorspronkelijken vorm des naams gekomen. Ook
E l e is weêr een verkorte, een versletene vorm. E l e staat in de
plaats van E d e l e , en is door zeer gewone uitslijting van de d (de)
ontstaan. Ook in het Hollandsch zegt men wel eêl voor edel,
vereêlen voor veredelen, vooral in dichterlijken stijl. E d e l e is de
volle vorm van dezen naam, die onder ons nog in zoo menigen
verschillenden verklein- en vleivorm voorkomt. E d e l e is een naam
die eene beteekenis heeft, die eenen zin te kennen geeft. Immers de
naam E d e l of E d e l e beteekent in der daad de edele, de edele
man. E d e l of E d e l e is de nieuwere vorm van den Oud-Frieschen
mansnaam A t h a l , dat is A d e l . Zoo heette, volgens de
overlevering, de tweede Prins van Friesland, de zoon van den
eersten, van F r i s o , en hij leefde 245 jaren voor Christus’ geboorte.
En A t h a l of A d e l , dien naam hebben vele oude Friezen
gedragen. Ook is de naam van het roemruchtige Oud-Friesche
geslacht A d e l e n er van afgeleid, en niets als een patronymikum
van A d e l . 6 De vrouwelijke vorm van A t h a l of A d e l is A t h a l a
of A d e l a , en dezen naam hebben zekerlijk vele Friezinnen in den
ouden tijd gedragen. Welke vader gaf niet gaarne zulken schoonen
naam, schoon in beteekenis en schoon in klank, aan zijn dochterke?
Ook was deze naam niet alleen bij de Friezen, maar bij alle Oud-
Germaansche volken in gebruik. Ook bij de oude Franken, die
gedeeltelijk de Germaansche voorouders der hedendaags geheel
verwaalschte Franschen geweest zijn. De naam A d e l a der
Frankische vrouwen is nog als Adèle bij de hedendaagsche
Fransche dames in gebruik. Andere volken, niet het minst ook de
Hollanders, hebben ook hier in, als in zoo menige andere zaak, de
Franschen nagevolgd, en zoo is nu Adèle vrij wel een
kosmopolitische naam geworden.
Ook een zeer oud verkleinend aanhangsel is le, dat achter namen
als E a b e l e , D o e k e l e , N a m m e l e geplaatst is.
Oorspronkelijk is het volkomen een en het zelfde als het
verkleinende achtervoegsel lyn bij de oude Hollanders en
Vlamingen, als lein bij de hedendaagsche Hoogduitschers, in de
woorden maegdelyn, oogelyn, vogellyn (niet vogelijn), en blümlein,
röslein, äuglein.
A b b e —A b b o .
A b e , A b e l e , E a b e , E a b e l e —A b o .
A d d e —A d d o .
A d e , E a d e , E d e —A d o , E d o .
A g e —A g o .
A g g e , E g g e —A g g o , E g g o .
A i k e —A i c o .
A i l k e —A i l c o .
A i s e , E i s e —A i s o , E i s o .
A l e , A l l e —A l o , A l l o .
E p p e , E p k e —E p p o , E p c o .
A t e , A t t e —A t o , A t t o .
A u k e —A u c o , A v o .
B a u w e , B a u k e —B a v o .
B o u w e , B o u k e —B u v o .
B o t e —B o t h o .
B r u i n —B r u n o .
D o e d e —D o d o .
D o e k e , D o e k e l e —D u c o , [230]in zuiverder, onverkleinden
vorm echter D o d o .
E d e —E d o .
E e l k e , E e l t j e —E e l c o ; in zuiverder, onverkleinden vorm
echter A d e l .
F e y e , F e i k e —F e y o , F e i c o .
F o k k e , F o e k e —F o c c o , F u c c o .
F o l k e —F u l c o .
H a y e , H a i k e , H a i t e , H a i t s e —H a y o , H a i c o ; de
laatste vorm is niet te verkiezen.
H e r e , H e e r e , H e a r e , H j e r r e —H e r o .
O e d s —O d o , U d o (spreek O e d o ).
O e n e —O n n o , U n o (spreek O e n o ).
P o p p e , P o p k e —P o p p o , P o p c o ; de laatste vorm is
niet te verkiezen.
S a k e , S a k e l e , S e k e l e , S e a k e l e —S a c o .
Ta k e , Te a k e , Te k e , Te k e l e , Te a k e l e —Ta c o .
S c h e l t e —S c e l t o .
S o l k e —S o l c o .
Ta d e , Te a d e —Ta d o .
T i e d e , T i e t e , T j i t t e , T j i t s e —T h i e d o of T h e o d o .
S i b e , S i b b e , S i p p e , S i p k e , S i b b e l e —S i b o ,
Sibbo.
W i b e —W i b o .
U i l k e , U i l t j e , U i l t z e n —U l o .
W i t e , W i t t e , W y t s e —W i t o .
W o b b e , W o p , W o p k e —W u b b o .
Ten slotte nog geef ik hier eene lijst van Friesche persoonsnamen in
hunnen hedendaagschen, verbasterden en verkleinden vorm, met
de oude, oorspronkelijke, volle vormen daar achter. De letters m en v
achter de namen duiden aan of zij mans- of vrouwennamen zijn.
A a r t , A r e n t , A a n m.—A r n of ook A r n o l d .
A l g e r . m.—A d e l g a r .
A l l e r t . m.—A d e l h a r t .
A n d e l e . m.—A n d o .
A a f j e , A a f k e . v.—A v a of ook A b a .
A a l t j e . v.—A d e l a .
A n s k e . m.—A n s o .
A u k e . m.—A u d o , A u c o of A v o .
A u k j e . v.—A u d a of A v a .
B e a n , B a a r t , B e e r t , B e r e n d , B a r e n d , m.—
Bernhard.
B a a r t j e , B a a t j e , B e r e n d j e (B e r e n d i n a ). v.—
Bernharda.
B a u w e . m.—B a v o .
B a u k j e , B a a i e . v.—B a v a .
B a r t e l e , B a r t l e . m.—B a r t of B r e c h t en B a r t h o l d .
B a r t e l t j e , B a r t j e , B r e c h t j e , v.—B a r t h a of
B e r t h a , of B r e c h t a en B a r t h o l d a .
B o u w e . m.—B u v o .
B o u k j e . v.—B u v a .
B i n n e , B i n s e , B e n t e , m.—B e n n o .
Bentje, Benskje, Bints, Binke, Bintje,
B i n t s k e , v.—B e n n a .
B e n n e r t , B i n n e r t . m.—B e r n h a r d .