The economic performance of state-owned enterprises in Central and Eastern Europe

Abstract

This article explores the economic performance of state ownership in the largest non-financial enterprises operating in 13 post-socialist Central and Eastern European (CEE) countries over the period 2007–2013. The largest state-owned enterprises (SOEs) are selected based on the ‘Coface – 500 Top Companies in CEE’ list in 2013. Of these 500 enterprises, 69 were identified as state-owned. All originated in the socialist period. The majority of them are from Poland and Ukraine. SOEs hold a dominant position in energy supply, the oil and gas sector, and transport. We find that the persistence of state ownership in post-socialist countries is caused by incomplete privatisation and the presence of SOEs within strategic sectors. The economic performance of the largest state-owned companies is, on average, comparable to their private counterparts.

Keywords:

• Largest state-owned enterprises
• ownership structure
• Central and Eastern Europe (CEE)
• post-socialist countries

Acknowledgements

We thank the participants of the 1st International Conference: The Role of State in Varieties of Capitalism – Achievements and Challenges for Central and Eastern Europe and the Emerging Markets, held in Budapest (26–27 November 2015) for their comments on earlier versions of this paper. We take exclusive responsibility for all the opinions expressed in this article.

Notes

1. By way of comparison, in the 2013 ‘Forbes Global 2000’ ranking, covering 2000 of the largest public companies in the world, there were 10 enterprises from CEE, including: seven from Poland, two from Hungary and one from the Czech Republic. From Russia, 28 companies were ranked among them with four in the first hundred.

2. In 2013, 27.52% of shares belonged to the Polish State Treasury.

3. For a discussion of different models of the state ownership of enterprises, see Bałtowski (2015); and for a review of terms and definitions of SOEs, see Bałtowski and Kozarzewski (2014, pp. 306–310), Bałtowski and Kwiatkowski (2016), and Christiansen (2011).

4. In the case of oil and gas companies it should be noted that the group of the 62 largest private companies consists of different entities, among which are entities that were privatised previously as well as private entities that emerged later.

5. This test was chosen because only small sets of observations were available. Besides, unlike the t-test, the U test does not require the assumption of normal distributions. It is nearly as efficient as the t-test on normal distributions. The null hypothesis – the distribution is the same for a different form of ownership – is rejected in the case of the result of the test being lower than 0.05 (the significance level). See Mann and Whitney (1947) and also Fay and Proschan (2010).

6. Ukraine was not been chosen because of the unavailability of data for many companies.

7. The registers of strategic enterprises with a treasury shareholding have been published by the Ministry of State Treasury since 2011. Previously the Ministry published the so called ‘Register of companies of crucial importance for public policy or public safety’. There is also a list of enterprises with a special significance for national economy, being under supervision of the Ministry of State Treasury. It comprises 31 entities.

8. The Industrial Development Agency and Polish Investments for Development.

9. English names and definitions of indicators are published officially by the GUS.

10. At the end of 2013 there were 630 entities under the supervision of the Ministry of State Treasury, of which 386 were in operation. Due to differences in the availability of information, 177 enterprises are analysed in the Report (the state’s stake varies from 1.28% to 100%).