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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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Executive summary

A renaissance of government development strategies? Policies for the business sector are back in fashion, not least in developing countries. At the same time, ”statist” approaches – whereby most important activities should be planned by the state – have been dropped in favour of more market-based strategies. The underlying cause is a disappointment in many countries with the outcomes of both the free-market model and the planned economies of yore. Governments increasingly look to the apparent success of a number of Asian countries whose economies have grown through strategies involving state intervention in economies that have remained essentially market-based. The tools of intervention have varied from the regulation of private-sector activities, to the control over financial intermediation and in some cases direct controls over financial institutions, to the pursuit of industrial policy through directly state-owned enterprises (SOEs). A key question raised in this report is the extent of the role that governments choose to assign to SOEs.

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