State Your Business!

State Owned Enterprises (SOEs) play a major role in many developing and emerging economies, where governments use them to achieve economic, social, and political objectives. SOEs deliver and extend access to services, fill gaps in markets, develop key sectors or regions, and provide employment. However, SOEs’ mixed institutional mandates and their political importance often pose performance, financial and governance challenges. This is IEG’s first systematic assessment of the Bank Group’s support for the reform of SOEs, looking at what works and the factors of success. It parallels Bank Group efforts to provide more integrated support to SOE reform in client countries and to empower staff with new tools. The evaluation focused on five major types of SOE reforms in the financial and energy sectors: (i) Corporate governance improvements; (ii) Business and operational reforms; (iii) Measures to strengthen competition and regulation in SOE markets; (iv) Privatization and other ownership reforms (including PPPs); (v) Macro, fiscal, and public financial management (PFM) reforms. The evaluation includes findings about the impact of competition on SEO performance; corruption control and its effect on SEO reform; the success of World Bank Group sequential and complementarity interventions; and about other factors that aid success such us client commitment, collaboration, strong design features, solid results frameworks and monitoring, and early risk identification. Based on the findings and lessons of experience drawn from this evaluation, IEG offers Management two recommendations to enhance the Bank Group’s support to SOE reform: (i) The World Bank Group should apply a selectivity framework for SOE reform support that considers country governance conditions, control of corruption, and sector and enterprise-level competition; and (ii) The World Bank Group should apply the MFD and its embedded Cascade approach for SOE reform.