Reforms to State-Owned Enterprises: the waiting game

BRISBANE, Australia - Aug. 23, 2017 - PRLog -- In many countries, and frequently developing countries, state-owned enterprises (SOEs) pose major challenges for governments. It is encouraging to note that a number of countries are now talking seriously of implementing reform measures for SOEs to reduce their financial burden on government budgets and balance sheets as well as improving SOE governance standards.

SOE constraints on government finances

Many governments provide ongoing budget support to SOEs. In addition, some governments have had to provide significant funding to bail out SOEs in response to their poor performance which has diverted funds from being allocated to other priority expenditure areas. Continued government financial support to some SOEs cannot always be justified for a range of reasons.

In addition to budgetary impacts, the use of government guarantees to support SOE external borrowings can expose governments to significant contingent liabilities which pose risks to government balance sheets.

Service delivery challenges

Many SOEs have an important role in delivering services to poorer members of society. Weak financial governance though often impedes SOE service delivery to the latter groups.

SOE problems now being recognised

Some countries have at last determined that they must act to address the problems created by poor performing SOEs as there is now a more robust appreciation of the impediments they place on overall economic performance.

Actions being mooted in a number of countries include:
• Restructuring of SOEs
• Rationalisation of existing SOEs
• Introduction of enhanced SOE governance frameworks
• Partial or outright sale of government SOE shareholdings

Stakeholders in a number of countries now wait to see whether SOE reforms proposed by their governments are actually implemented.

Possible SOE reforms recently outlined by some countries are highlighted in PFMConnect's "State-owned enterprise Reform Roundup" blog now available at the PFMConnect blog site www.blog-pfmconnect.com. PFMConnect continues to monitor progress being achieved around the world in reforming SOEs. An extensive range of articles on SOEs is available on PFMConnect's SOE board, http://blog-pfmconnect.com/category/state-owned-enterprises-board/.

Note: PFMConnect is a consultancy that supports the development of good standards of public financial management in order to improve public service delivery, extend public accountability, encourage local business development and combat corruption. Its work is principally centred on developing countries, working in cooperation with governments and other stakeholders.

For additional information about PFMConnect, please visit www.pfmconnect.com or contact david.fellows@pfmconnect.com or john.leonardo@pfmconnect.com.