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State-Owned Enterprises as Global Competitors

A Challenge or an Opportunity?

image of State-Owned Enterprises as Global Competitors

An estimated 22% of the world’s largest firms are now effectively under state control, this is the highest percentage in decades. These firms are likely to remain a prominent feature of the global marketplace in the near future. The upsurge of state-owned enterprises (SOEs) as global competitors has given rise to concerns related to a level playing field.  Some business competitors and observers claim that preferential treatment granted by governments to SOEs in return for public policy obligations carried out at home can give SOEs a competitive edge in their foreign expansion. The OECD has taken a multidisciplinary approach, looking at the issue from the competition, investment, corporate governance and trade policy perspectives.  The report aims to sort fact from fiction, and develop a stronger understanding, based on empirical evidence, on how to address growing policy concerns with regard to SOE internationalisation. The report concludes that although there is no clear evidence of systematic abusive behaviour by SOE investors, frictions need to be addressed, in view of keeping the global economy open to trade and investment.

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International investment and state-owned enterprises

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.

English

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