Table of Contents

  • The role of state-owned enterprises (SOEs) as global competitors is growing and this has given rise to concerns regarding their competitive situation. This report takes a multidisciplinary approach, looking at the issues from the competition, investment, corporate governance and trade policy perspectives. The report aims to "demystify" SOEs and develop a stronger understanding, based on empirical evidence, of how to address growing policy concerns with regard to the internationalisation of SOEs with a view to keeping the global economy open to trade and investment.

  • The centre of gravity of the world economy is shifting as emerging market economies - some with large state sectors – come to play a growing role in the global marketplace. The deepening of commercial links and global value chains, as a result of trade and investment liberalisation, has opened the door to significant economic opportunities. However, this gravity shift has also created debate about economic models that rely to different degrees on state interventionism to achieve growth and industrial development. This report aims to provide greater clarity around some of the key issues.

  • An estimated 22% of the world’s largest 100 firms are now effectively under state control, the highest percentage in decades. Many of these operate in sectors with important upstream and downstream roles in international supply chains, such as public utilities, manufacturing, metals and mining, and petroleum. An important channel for the rapid internationalisation of state-owned enterprises (SOEs) has been cross-border mergers and acquisitions (M&A). Since 2007, M&A activity by SOEs has grown rapidly - especially from emerging markets - with a notable surge during the 2008-09 economic and financial crisis, and with continued growth compared to overall M&A or foreign direct investment. Emerging market economies with important state sectors are expected to grow more briskly than average for the foreseeable future, and their international investment will increase in parallel. Moreover, the deepening of international commercial links, suggest that SOEs are likely to remain a prominent feature of the global marketplace.

  • This chapter describes the main issues and definitions covered by the report. It provides an empirical overview, based on original OECD analysis, of the share of state-owned enterprises (SOEs) in the global economy, their geographical and sectorial concentration, and their value among the world's largest firms. The data points to a marked rise in the share of SOEs as global competitors, and as such discusses how the international expansion of SOEs has triggered concerns regarding their competitive situation. It compares perceptions of concerns, based on original survey data, across business, industry and regulation. Finally, the chapter zooms in on the steel sector, with an overview of recent analysis of steel markets, the role of SOEs in steel production and their financial performance.

  • Cross-border investment by state-owned enterprises (SOEs) is not a new phenomenon. It has a long history, but its acceleration in recent years – as well as the growing involvement of emerging economies as actors on this stage – has nonetheless begun to generate some policy debate and uncertainty among host countries for these investments. This chapter provides some stylised facts on international merger and acquisition (M&A) activity, exploring the prevalence of SOEs as acquirers or targets, and the sectorial composition and key attributes of deals involving SOEs. It attempts to sort “fact from fiction” regarding the investment effects of SOE internationalisation and the corresponding concerns. The chapter explores domestic policy frameworks, international treaty practice and OECD instruments designed to deal with cross-border SOE investments. It points to the fact that most investment policies, until now, have not addressed the sources of undue advantage for SOEs.

  • SOEs are growing actors in international trade and global value chains. This chapter explores the extent to which the international trading system, under the rules of the WTO and other international agreements, are equipped to cover market distortions caused by financial and regulatory support granted to (and by) SOEs. The chapter points out that trade rules are ownership neutral, but it remains debated whether a specific set of rules are need to cover SOEs. The chapter explores regulatory frameworks and practices at the domestic level which can safeguard a level playing field. It covers existing binding international agreements and treaty practice, and explores potential gaps in their coverage. It points to the need for sounder incentives for states and SOEs to abide by market and transparency principles, including the consideration of rules on subsidies granted to SOEs as a priority for further deliberations in the international trade context.

  • The enforcement of competition law has been and continues to be an important lever in levelling the playing field in markets where SOEs and other market actors compete. This chapter looks at specific competition law approaches, drawing on case examples, applicable to the conduct of SOEs. It draws three main pillars: preventing the abuse of dominance, blocking or remedying anti-competitive mergers, and breaking up cartels. It also points to some challenges for competition enforcement where SOEs and crossborder transactions are concerned. It draws attention to additional levers, beyond competition enforcement that can serve to level the playing field. It points to advocacy; competitive neutrality; harmonized accountability and transparency requirements; and consistent application of rules concerning subsidies or state aid, as means to ensure that policies in one jurisdiction do not advertently or inadvertently impact the competitive environment in others.

  • Governments acting as the owners of enterprises engaging in cross-border trade and investment face a number of issues regarding their ownership and governance structure. This chapter covers the main areas of concern for the government as an owner; and concerns for regulators and policy makers in foreign jurisdictions. It points to examples of the actions taken, at the national as well as international level, to address some of the concerns. These include adhering to codes of corporate governance and competitive neutrality arrangements. The chapter also extensively covers provisions of the OECD Guidelines on Corporate Governance of State-Owned Enterprises that are applicable to SOEs operating across borders. The Guidelines promote the clarification of SOE objectives; sound regulation and governance practices; the independence and autonomy of SOEs; and better monitoring through strengthened transparency and disclosure, as priority areas to focus on.

  • This chapter summarises evidence found in this report to assess the degree to which concerns related to SOEs as global competitors are shared by regulators and businesses. It further draws dividing lines between various policy communities on the types of challenges, and weighs in on the main concerns that need be addressed: namely: maintaining a level the playing field, and reconciling SOE public policy obligations. It considers the importance of these challenges and the policy tools that currently exist to help governments maintain a level playing field between SOEs and the private sector.