State Owned Enterprises

A challenge for anti-corruption fight in Central and Eastern Europe

Poor SOE performance seems to lead to a plethora of problems for government budgets, financial stability and market reforms. It has been shown that, in general, SOEs perform worse than private firms in terms of profitability and productivity, while sectoral allocative efficiency is lower when a larger fraction of employees is working in SOEs.

SOEs face the perpetuation of unethical business practices – preferential employment, covert financing of political parties and corrupt procurement being the best-known examples. Such a milieu is possible due to poorly constructed corporate governance arrangements: a lack of public scrutiny mechanisms, political appointments to managerial positions, no internal control practices and shallow external audits.

More info here.

EU Anti corruption report 2014

The report covers specific acts of corruption and those measures that the Member States take specifically to prevent or punish corrupt acts as defined by the law. Secondly, it covers certain types of conduct and measures which impact on the risk of corruption occurring and on the capacity of a State to control it.

The report looks at whether adequate control mechanisms and transparent, competitive procedures are in place to reduce the risk of corruption, both in state-owned companies or private ones, tackling also long-term risks related to corruption, nepotism and clientelism.

State-Owned Enterprises in the EU: Lessons Learnt and Ways Forward in a Post-Crisis Context, Institutonal Paper, July 2016

SOEs account for a large part of assets and employment in developed economies. In Europe, the scope of public ownership in various sectors of the economy is particularly extensive in some of the new Member States such as Romania, but also in some EU15 Member States such as Italy.

While governments’ participation in corporations may be beneficial for Member States’ budgets, it could also lead to direct budgetary costs, in particular when companies are loss making or are run inefficiently. Going forward, increased compliance with reporting obligations would enable a better monitoring of potential risks for public finances. Thus, the objective of this report is to analyze recent developments of SOEs in the EU, to assess past and future challenges and identify best practices with reform efforts.

More info here.