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State-Owned Enterprises in the Development Process

image of State-Owned Enterprises in the Development Process

This publication is a first response of the OECD to the issue of what role is, or can be, assigned to SOEs as part of national development strategies. The first part of the publication overviews the experiences of five countries (Brazil, China, India, Singapore and South Africa) with using SOEs, and other government-controlled entities as agents of their development strategies. The second part reviews the growing internationalisation of SOEs through foreign trade and investment. These show implications that the usefulness of SOEs in promoting economic development hinges on a number of factors, not least the level of economic development at the beginning of the process. Indeed, if the government’s ambition is to follow a development path already trod by numerous comparable nations it is relatively easy to hammer out a strategy and provide the SOEs with company-specific objectives toward the fulfilment of the strategy. However, experience also shows that some crucial conditions generally need to be met for such SOE-based strategies to be successful, taking into account the capacity of national bureaucracies and avoiding possible adverse impacts on international trade and investment.

 

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A look at state-owned enterprises and development

Policies for the business sector are back in fashion. In highly developed countries, this has been the case at least since the most recent economic crisis forced a rethinking of industrial competitiveness and structural priorities. In developing countries, the process has been underway for much longer. In their case, policy action has traditionally been guided by broad-ranging structural reform priorities, set forth in national developmental strategies and policies. The question has been whether to supplement these with a specific and targeted “industrial policy” aimed at nurturing industrial development; very often also furthering the interests of certain priority sectors and/or prioritising individual “national champion” enterprises. This has been the case increasingly over the past decade.

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