State-owned enterprises in the Middle East and North Africa: privatization, performance and reform

Does the mixed-ownership reform of Chinese state-owned enterprises improves their total factor productivity?

This case study investigates the potential impact of privatisation on the financial performance of infrastructure State Owned Enterprises (SOEs) in the Middle East and North Africa (MENA) region. It considers initiatives taken in Tunisia, Morocco, Saudi Arabia, and Jordan between 1988 and 2003. The financial performance is assessed in terms of profitability, operating efficiency, capital expenditures, leverage and financial risk levels, cost of labour and share prices. The results show that post privatisation financial results depend on the pre privatisation status of the SOEs, as well as on various reforms considered in its economic environment. Sales, labour efficiency, and labour costs improved post-privatisation. Moreover, profitability levels increased in only 40% of the considered sample. Percentage changes in the share price surpassed the percentage changes in the market indices in some countries, but not in every country. Capital expenditure levels were stable compared to pre privatisation levels. Additionally, debt and credit risk levels decreased post-privatisation. Finally, the study reports that managerial restructuring has the potential to generate the same (and even better in some areas) results as privatisation, but this do not mean that state ownership is optimal in the long run. The overall conclusion is that privatising infrastructure SOEs is optimal in the MENA region but should be preceded by managerial and financial reforms in order for it to lead to optimal economic results and to allow for financial performance improvements to appear.

The purpose of this paper is to shed light on the political economy aspects of state-owned-enterprises (SOEs) governance and privatization in the Middle East and North Africa (MENA) region. In particular, the paper presents an overview of privatization in the region and examines the extent to which SOEs operate at arm's length from the public sector and the motives for this behavior. Showing empirically the region’s relative reticence on privatizing public assets, the paper highlights the political economy aspects contributing to this impasse, offers Lebanon as a case study, and suggests a policy framework for successful reform of SOEs. Highlighting the lack of sustainable drives for SOEs reform and privatization in the region and the need for better governance systems based on the rule of law, property rights protection, and combating corruption, the paper proposes policy options to deal with privatization and improve the governance of SOEs through advocating a state-owned enterprise governance framework. This framework suggests subjecting SOEs to regulation and supervision of more than one government entity as opposed to only one ministry of custody. This should help to ensure a level-playing field in the industry and reduce the pressure on SOEs to heed to political pressures.

(A Study on State-Owned Enterprises Reform in China)

Contents of the report are as follows: Long-term economic development: challenges and prospects for the Arab countries by Mustapha K. Nabli. Reform complementarities and economic growth in the Middle East and North Africa by Mustapha Kamel Nabli, and Marie-Ange Veganzones-Varoudakis. After Argentina: was MENA right to be cautious? By Mustapha K. Nabli. Restarting Arab economic reform by Mustapha K. Nabli. Democracy for better governance and higher economic growth in the MENA region? By Mustapha K. Nabli, and Carlos Silva-Jauregui. The political economy of industrial policy in the Middle East and North Africa by Mustapha K. Nabli, Jennifer Keller, Claudia Nassif, and Carlos Silva-Jauregui. The macroeconomics of labor market outcomes in MENA by Jennifer Keller, and Mustapha K. Nabli. Challenges and opportunities for the 21st century by Mustapha Nabli. Labor market reforms, growth, and unemployment in labor-exporting countries in the Middle East and North Africa by Pierre-Richard Agenor, Mustapha K. Nabli, Tarik Yousef, and Henning Tarp Jensen. Economic reforms and people mobility for a more effective EU-MED partnership by Ishac Diwan, Mustapha Nabli, Adama Coulibaly, and Sara Johansson de Silva. Cruise control, shock absorbers, and traffic lights by Mustapha K. Nabli. Trade, foreign direct investment, and development in the Middle East and North Africa by Farrukh Iqbal, and Mustapha Kamel Nabli. Making trade work for jobs by Dipak Dasgupta, Mustapha Kamel Nabli, Christopher Pissarides, and Aristomene Varoudakis. Exchange rate management within the Middle East and North Africa region by Mustapha Nabli, Jennifer Keller, and Marie-Ange Veganzones. How does exchange rate policy affect manufactured exports in MENA countries? By Mustapha Kamel Nabli, and Marie-Ange Veganzones-Varoudakis. Public infrastructure and private investment in the Middle East and North Africa by Pierre-Richard Agenor, Mustapha K. Nabli, and Tarik M. Yousef. Governance, institutions, and private investment by Ahmet Faruk Aysan, Mustapha Kamel Nabli, and Marie-Ange Veganzones-Varoudakis.

Comment on “The Current Wave of State Enterprise Reform in China: A Preliminary Appraisal”

The differential compensation distribution of executives is an important direction of deepening the reform of state-owned enterprises (SOEs). The compensation of SOEs is mainly decided by SASAC according to the unified compensation management method, and tends to adopt the equalitarian compensation distribution mode, leading to the generally low pay dispersion among non-CEO executives in SOEs, which greatly frustrates the work enthusiasm of the executives in SOEs, and often leads to more serious executive agency problems. However, there are few studies on the difference of compensation incentives in the top management team, which mainly focus on the vertical compensation gap between CEO and non-CEO executives, and the research on the internal compensation allocation of non-CEO executives is relatively scarce.Using the compensation data of all the non-CEO executives in listed SOEs from 2005 to 2017, this paper studies whether the pay dispersion among non-CEO executives has a positive governance effect in reducing the executive agency costs of SOEs. We find that, the pay dispersion among non-CEO executives can effectively reduce the executive agency costs of SOEs, and the results are still robust after adopting the IVs and the differential compensation reform of SOEs in 2015 as the exogenous event to control the endogenous problem. Further, we document that reducing the supervision cost and improving the incentive efficiency of non-CEO executives are two potential mechanisms. Specifically, when there are more supervision costs and less incentives for non-CEO executives, the above positive governance effect are more salient.This paper offers empirical evidence for the positive governance effect of the pay dispersion among non-CEO executives in SOEs, and makes up for the deficiency of negative effects such as high turnover and poor corporate performance caused by the pay dispersion among non-CEO executives. This paper not only enriches the literature on the pay dispersion among non-CEO executives, but also extends the related literature on the executive agency costs of SOEs. In addition, this paper has certain policy reference value for further deepening the reform of SOEs and improving the differential compensation distribution system of executives in SOEs. The promulgation of Guiding Opinions on Deepening the Reform of SOEs in 2015 means that, in the context of a new round of comprehensively deepening the compensation reform of SOEs, the incentive mechanism of executives in SOEs should not be limited to the level of executive compensation, but should consider whether the compensation distribution within the top management team is reasonable. Increasing the pay dispersion among the top management team is not only an efficiency issue, but also a fair issue. The underlying economic logic is that the pay dispersion among the top management team is an institutional arrangement for SOEs to reduce the agency costs under the specific governance environment in China. Only by truly realizing differentiated incentives for the top management team, can the enthusiasm of executives in SOEs be effectively activated, the agency efficiency be improved, and the high-quality development of SOEs be realized.

This study investigates the impact of privatization on value creation in State Owned Enterprises (SOEs) in the Middle East and North Africa (MENA) region. A multi-case study approach, using quantitative and qualitative data, is used to rectify the findings of prior SOE privatization research by taking a finer-grained analysis into the conditions that determine post-privatization performance. This study addresses the research question, "What is the effect of privatization in terms of value creation for State Owned Enterprises in the Middle East and North Africa (MENA) region?" Value creation is measured in terms of profitability, operating efficiency, capital expenditures, and leverage. Using quantitative performance metrics to assess value creation, we also use qualitative data to show that post-privatization value creation depends on specific strategic initiatives as well as government policy toward competition. Our overall conclusion is that privatizing SOEs can be beneficial in the MENA region but must coincide with strong government reform policies, and certain financial and managerial strategies.

Introduction 1. Middle East and North Africa: A Harmonized Geographic Region Without a Complete Regionalism 2. The Economic Development of Late Comers 3. Institutions and Development in the Middle East and North Africa: Between Economic Challenges and Stability Policies 4. Demographic Dynamics and Development Implications in the Middle East and North Africa 5. The Performance of MENA Economies Between Internal Conditions and External Shocks 6. Social Contract, Human Development and Welfare in MENA 7. Human Capital and Labour Markets in the MENA Region 8. The Migration-Development Link in the MENA Region 9. The Openness of the MENA Economies: Beyond the Lost Regionalism, En Route For A New Regional Arrangement 10. Conclusion

Introduction Vietnam began the first steps of its reform of state-owned enterprises (SOEs) in the early 1980s. This subsequently evolved into a massive and fundamental reform of SOEs, towards a greater degree of market orientation in the late 1980s and early 1990s. At first, the reform of Vietnam's SOEs was primarily in the area of management and planning, thereby providing more autonomy for SOEs within the framework of a centrally planned economy and the gradual reduction of state subsidies and allowances. Until the implementation of the doi moi (economic reform) programme in 1986, whilst there had been some renovation of the state sector, SOEs were still operating within an environment without market competition. At that time the economy simply consisted of the state and collective sectors, with no private sector. Under such conditions, the management of SOEs was a purely administrative exercise. Without the pressure of competition, SOEs found no motive for the revision and improvement of regulations intended to make them more operationally efficient. Instead, SOE managers tended to concentrate all their efforts on fulfilling mandatory targets assigned to them, and dutifully obeying directives or orders stemming from the resolutions and decrees of the ruling party and government. To implement the economic renovation process, and develop a multisectoral economy, is to develop a wide range of production factors, including: SOEs, family and collective enterprises, individuals’ businesses, private limited companies, shareholding companies, joint ventures with foreign firms, and so on. Economic reform, therefore, is to change from a centrally planned economy into a market-oriented, multi-sectoral economy, operating under a market mechanism. Enterprises with different forms of ownership structure are encouraged to develop and compete in this market environment. In such a context, a demand arises for a better defined and more appropriate legislative framework, in order to ensure the equality of all enterprises before the law, and the concretization of the legal provisions needed to regulate the economy and the various enterprises (including SOEs).

This study aims to understand the main factors that contribute to the failure of implementing New Public Management (NPM) plans, as well as to investigate the potential link between informal networks, namely wasta, and this failure in organizations across the Middle East and North Africa (MENA region), with Jordanian public organizations taken as an illustrative case. A qualitative approach was applied, and a total of 24 semi‐structured interviews were conducted with HR officials in Jordanian public organizations, different state‐owned enterprises (SOEs), ministries, and government agencies (GAs). The results show that wasta contributes to the failure of NPM implementation in Jordanian public organizations, indicating that public employees contribute directly to the failure of NPM strategies in Jordanian public organizations for many reasons on top of which their resistance to these reform plans. Our findings also suggest that the implementation of NPM strategies failed to diminish the use of wasta in HRM practices even though wasta was an important reason to implement NPM. This study adds knowledge to the limited informal networks literature, by exploring the interplay between informal networks on one side, and the NPM literature on the other side.

State-owned enterprises (SOEs) play a significant role in providing public goods and services such as utilities and infrastructures. They also play a considerable role in promoting a country’s national agenda, such as providing employment opportunities, promoting national corporates and implementing socioeconomic and industrial policy. Since the state is a significant owner of SOEs, the latter enjoy a monopolistic position in the market and have a competitive advantage vis-à-vis other private enterprises. This creates many unintended market consequences such as inefficiency, nontransparency, and weak governance. Various regulatory and institutional frameworks for reforming SOEs have been adopted by countries around the world in order to stimulate competition, increase efficiency, and improve the level of their performance. However, the outcomes of these reforms are rather mixed. In Asia, for example, many SOEs are still operating less efficiently due to their complacent position in the market leading to poor performance. Against this backdrop, this paper aims to explore the experience of regulatory reform of SOEs in Thailand and Malaysia and the challenges that the countries are or have been facing in undertaking such reform. The paper will be divided into five main parts. The second part explores the international perspective of regulatory frameworks, designed to incentivize reforms of SOEs. The third part explores the experience of Thailand and Malaysia in constituting their regulatory frameworks for the reform of SOEs. The fourth part discusses and analyzes the approach of Thailand and Malaysia toward the reform of SOEs as well as issues and challenges associated with such reform. The fifth part concludes the paper and provides some recommendations regarding better regulatory frameworks for the reform of SOEs.

PurposeThis paper aims to provide a review of the challenges facing the reform of SOEs, and to address the impacts of SOE reform on business executives, on the base of literature review and empirical data collected in Guangzhou, China.Design/methodology/approachA qualitative research on the base of literature review, supported by empirical data collected from surveys, interviews, and focus group discussion.FindingsAlthough China has made significant achievement in economic reform and the transition into a market system and civil society since 1978, there are still fundamental challenges associated with the reform of state owned enterprises (SOEs). It seems that privatisation will not necessarily solve the complex problems associated with SOEs. This paper suggests that a balanced approach reflecting the best of SOE provision and triple bottom line management appears to provide the best way forward for continuing prosperity in China. The current direction of SOE reform seems to have been driven by privatisation and economic rationalism, rather than a more balanced economic and social strategy. If this trend continues, the challenges for business executives, and the general society, can be overwhelming, and not lead to a more sustainable economy, let alone society, in the medium to long term.Originality/valueReform of SOEs has impacted on China fundamentally. Against the common view that business managers are the social group that is benefiting from SOE reform, this paper focuses on factors affecting the economic and social status of business executives, especially the challenges associated with the reform of SOEs. Supported by primary and secondary data sources, it draws attention to the situation that although the economic and social status of business executives continues to rise in China, insecurity and stress on business executives are growing. Reforms associated with changing SOEs are viewed as possible sources of challenges facing the Chinese economy and business life. Current SOE reform seems to have focused on the economic bottom line. A more balanced approach in the reform of SOEs is suggested for a more sustainable economy and society.

<p>The region of the Middle East and North Africa (MENA region) encompasses countries of the eastern Mediterranean, the Middle East, and North Africa, from Morocco in the West to the Islamic Republic of Iran in the East and from the Syrian Arab Republic in the North to the Republic of Yemen in the South. It is home to some 500 million inhabitants and is characterized by widely varied political and economic settings and a rich cultural heritage. Stark environmental gradients, as well as significant differences in the provision of ecosystem services, both East to West and South to North, are typical for the MENA Region.</p><p>Climate changes in the Mediterranean Basin, in general, and in the MENA countries, in particular, currently exceed global mean values significantly. Numerical model results indicate that this trend will continue in the near future and imply that the number of extreme summer temperatures and heatwaves may increase significantly over the coming decades. At the same time, a decrease in precipitation and a significantly longer dry season for most MENA countries than at present are anticipated. This leads to a significantly increased demand for water and energy. In addition, other factors further exacerbate these demands in the MENA, including the general economic development, extreme population growth and increasing urbanization, changes in lifestyle, shifting consumption patterns, inefficiencies in the use of resources that result from technical and managerial inadequacies and energy and water subsidies in several countries of the region to name but a few.</p><p>The impacts of climate change will be particularly severe in urban settings and large cities of the Mediterranean Basin and the MENA region. Cities will see an enhanced heat accumulation compared to the surrounding rural land due to heat-build-up in buildings, transportation infrastructure, and enhanced human activities. Reduced ventilation within cities exacerbates the warming, particularly during summer heatwaves. Consequently, additional, energy-intensive space cooling will be needed in order to maintain acceptable indoor conditions. With regard to water scarcity, the aforementioned decreases in precipitation will reduce available drinking water for city inhabitants and green spaces. This requires the provision of unconventional water sources, e.g., through desalination, which requires significant quantities of energy. Overall, climate change will exacerbate resource demand for water and energy, in general, and in urban settings, in particular.</p><p>However, the provision of water and energy are interrelated. In order to maintain water and energy security in the MENA region, these issues need therefore be considered holistically in the framework of the Water-Energy-Nexus (WEN).</p><p>The present paper aims to elucidate some of the interrelationships between water and energy resources and their provision and will briefly outline a few of the possible mitigation/adaptation options/strategies to reduce adverse impacts of climate change on the MENA region and its inhabitants.</p>

Credit Cycles in Countries in the MENA Region - Do They Exist? Do They Matter?