State Owned Enterprises

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Poland, China, USA Galen Bepler November 19, 2009

description

Continuum: SOE.........Corporate Takeovers

Transcript of State Owned Enterprises

Page 1: State Owned Enterprises

Poland, China, USA

Galen BeplerNovember 19, 2009

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This presentation provides examples of the limits and heights of enterprise privatization

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PBS documentary, “Commanding Heights”: industries that control and support others, like oil, railroads, banking, steel◦ 0.00 to 2.22

Utilities: energy, communications, water Transportation: railways and aviation Banking : insurance & financial services Strategic sectors: steel, petrol, agriculture

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Social and commercial ◦ Social welfare: job security, housing & education

subsidies, generous pensions◦ Commercial prowess

Soft-budget constraints Government appointments Negative productivity growth

Economists say…. Inefficient Low productivity Low profitability Stifles economic growth

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4 banks in China Bank of China China construction bank Industrial and commercial bank of China Agricultural bank of China

General Motors◦ Became state owned on July 10, 2009◦ IPO will be issued in 2010

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CNOOC, China National Offshore Oil Corporation◦ Shares traded in Hong Kong and New York

“Iron rice bowl” confronts WTO commitments◦ Unfair competition

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“Commercialization” or stock distribution

“privatization through liquidation” or management/employee buyout

“Spontaneous privatization” or Auction or Tender

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Will never please everyone

◦ Other methods: Negotiated Sale Stock flotation or Initial Public Offering Voucher or coupon privatization still in vogue ? Joint venture how foreigners must do business in

China Build-own-operate-transfer: BOOT agreements

infrastructure projects Leasing Management contract market reform in China

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We are talking about property rights or ownership schemes

Which comes first? ◦ Privatization◦ OR◦ Property Rights regime

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State ownership, a result of:◦ Historical randomness ◦ Systematic policy ◦ Specific, “commanding heights” industries◦ National financial crises, “nationalizations”

100% to 51% state ownership = SOE◦ OR, state ownership < 50% = private, but may still

confer the state with 49% management influence

Privatization has best results when part of a larger development strategy

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World of corporate ownership is dynamic & hostile ! ◦ 0.30 – 2.05

◦ Hostile takeovers ◦ Corporate raids◦ Activist shareholding◦ Leveraged buyouts

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Investment banks Speculators Portfolio managers Individual investors, like you & me. Entrepreneurs Consultancy firms, employees like you ? Government consul from US commercial

officers Employees & managers of corporations

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Do you think privatization of SOE efficiently finances development ?◦ Which privatization method do you find “best”?◦ Pitfalls to certain privatization methods ?