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Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options


  • Antonio Capobianco


  • Hans Christiansen



Competitive neutrality implies that no business entity is advantaged (or disadvantaged) solely because of its ownership. The Paper argues that far from all SOEs have the opportunity or the incentives to act in an anti-competitive way, and a trend in recent decades toward more fully corporatised and commercially operating SOEs has no doubt improved overall efficiency. However, problems remain, not least in the network industries where many remaining SOEs are market incumbents that continue to enjoy monopolies in part of their value chains or government subsidies, purportedly in compensation for public service obligations. Renewed concerns about competitive neutrality have also arisen from the market entry of SOEs domiciled in countries where the process of corporatisation has yet to run its full course.To counter these problems some OECD countries as well as the European Union have established specific competitive neutrality frameworks. These frameworks go beyond addressing the anti-competitive behaviour of SOEs, to also establish mechanisms to identify and eliminate such competitive advantages as they may have, including with respect to taxation, financing costs and regulatory neutrality. The experience so far with such formal arrangements is generally encouraging. Jurisdictions that have them have generally been successful in rolling back state subsidies and, on the evidence to date, have obtained significant economic efficiency gains.The Working Paper concludes that a full implementation of the OECD Guidelines on Corporate Governance of State-Owned Enterprises would go a long way in ensuring competitive neutrality. The business activities of currently unincorporated segments of the government sector would become much more competitive and accountable if they were made subject to the Guidelines. For incorporated SOEs the Guidelines also include a portmanteau recommendation of a “level playing field”. However, they offer only limited concrete recommendations on how governments are expected to obtain this outcome in practice. The Guidelines are moreover weakly implemented in a number of countries.

Suggested Citation

  • Antonio Capobianco & Hans Christiansen, 2011. "Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options," OECD Corporate Governance Working Papers 1, OECD Publishing.
  • Handle: RePEc:oec:dafaae:1-en
    DOI: 10.1787/5kg9xfgjdhg6-en

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    Cited by:

    1. Mikhail Gershman, 2013. "Innovation Development Programmes for the State-owned Companies: First Results," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 7(1), pages 28-43.
    2. Heechul Min, 2015. "Consumer benefits of reforming a state-dominated industry," Journal of Regulatory Economics, Springer, vol. 47(1), pages 58-77, February.
    3. WATANABE Mariko, 2015. "Identifying Competition Neutrality of SOEs in China," Discussion papers 15134, Research Institute of Economy, Trade and Industry (RIETI).
    4. Davis, Christina & Fuchs, Andreas & Johnson , Kristina, 2014. "State Control and the Effects of Foreign Relations on Bilateral Trade," Working Papers 0576, University of Heidelberg, Department of Economics.
    5. Duc Nam Phung & Anil V. Mishra, 2016. "Ownership Structure and Firm Performance: Evidence from Vietnamese Listed Firms," Australian Economic Papers, Wiley Blackwell, vol. 55(1), pages 63-98, March.
    6. Cassey LEE & Yoshifumi FUKUNAGA, 2013. "Competition Policy Challenges of Single Market and Production Base," Working Papers DP-2013-17, Economic Research Institute for ASEAN and East Asia (ERIA).
    7. Sebastian Zwalf, 2017. "Competitive neutrality in public-private partnership evaluations: a non-neutral interpretation in comparative perspective," Asia Pacific Journal of Public Administration, Taylor & Francis Journals, vol. 39(4), pages 225-237, October.
    8. Balázs Égert & Antoine Goujard, 2014. "Strengthening Competition in Poland," OECD Economics Department Working Papers 1125, OECD Publishing.

    More about this item


    competitive advantages; competitive neutrality; corporate governance; corporate neutrality; state-owned enterprises;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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