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State-Owned Enterprises in the Middle East and North Africa

Engines of Development and Competitiveness?

image of State-Owned Enterprises in the Middle East and North Africa

State-owned enterprises (SOEs) are an important feature of the economic landscape in the Middle East and North Africa region and yet, their contribution to the local economies has not been subject to a systematic investigation. SOEs in the region are generally perceived as inefficient and subject to sub-optimal governance arrangements but at the same time, and somewhat paradoxically, they are often charged developmental mandates that typically go beyond their stated commercial objectives. This phenomenon owes to the historically prominent role of the state in the economic development in the region and the recently renewed interest in using select SOEs as anchors of national industrialisation and competitiveness strategies.

This publication contributes to the limited existing literature on the role of SOEs in the economic development by examining the contribution of MENA SOEs to industrial development, diversification, poverty elimination and the provision of goods and services to the public more generally. Second, it provides an overview of the diverse mandates and roles of MENA SOEs and assesses the costs of these obligations with a view to isolate ownership and governance practices that have contributed to the success of some companies and poor performance of others. Recommendations to policymakers as well as management and boards of SOEs are made based on these observations at the end of the publication.

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Implications of the diverse objectives of MENA state-owned enterprises

Extra-commercial objectives pursued by SOEs have a number of implications on MENA economies. First, SOEs, much as the overall public sector, are often forced to create employment opportunities in order to absorb excess labour force, in detriment to their productivity. Secondly, SOEs’ social objectives and the manner in which they are compensated for fulfilling them, have serious implications for the emergence of a level-playing field between state-owned and private sector incumbents. Third, the lack of transparency and accountability in some SOEs has led to the emergence of allegations, and in some instances evidence, of corruption in these companies. Taken together, these trends have created a situation where many SOEs are either unprofitable or loss-making, weighing heavily on government budgets which are under significant strain in recent years in most countries of the region. Good corporate governance for SOEs is increasingly seen as part of the solution to the corruption and even performance-related challenges faced by SOEs.

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