In Bulgaria, Chile, France, Greece, the Netherlands, Peru and Sweden, all SOEs are classified as commercially oriented (i.e. they operate in open market competition, and must be profitable and efficient), regardless of the nature of their objectives. However, in Greece, SOEs which may serve a public policy are funded in part or in whole from the state budget. Information is not available for Australia, Austria, the Slovak Republic and Spain.
In Brazil, SOEs are classified as “dependent” and “non-dependent”. While “dependent SOEs” are those that receive funds from the controlling shareholder to be spent in operational expenditure or overhead expenditures, “non-dependent SOEs” can only receive funds from the controlling shareholder to capital expenditures. For the purpose of this report, the latter are considered as ‘commercial’.
In Colombia, CONPES 3851 of 2015 and CONPES 3927 of 2018 set out the criteria classifying SOEs according to their orientation.
A first group includes companies that develop public policy objectives, and through which the state seeks to correct market or government failures, or participate in strategic sectors. For the companies belonging to this group, the state must have a majority participation.
A second group includes companies that create profitability and are a source of tax revenue to the state. In that regard, these companies should have a high level of returns and contribution to the capital income of the General Budget of the Nation (PGN). These companies can operate in any sector of the economy and may be maintained in the long-term portfolio of the Nation.
In Costa Rica, SOEs are generally considered policy-oriented, and are considered “commercial” when, in addition to their public service mandates, they carry out their operations in open market competition. As such, commercial SOEs include the Bank of Costa Rica (BCR) and five of its subsidiaries, National Bank of Costa Rica (BNCR) and its four subsidiaries, National Insurance Company (INS) and three of its subsidiaries, Costa Rican Institute of Electricity and two of its subsidiaries, Costa Rican Mail Service S.A., National Cultural Radio and Television System (SINART), Atlantic Economic Development and Port Administration Board (JAPDEVA) and Costa Rican Institute of Ports of the Pacific Ocean (INCOP).
In the Czech Republic, SOEs are divided between companies (defined by Act No. 90/2012 Coll., On Companies and Co‑operatives) and state enterprises (defined by Act No. 77/1997 Coll., On State Enterprise). In particular, Article 2 of the Act on State Enterprise defines state enterprises as fulfilling tasks of important strategic, economic, security or other state interest.
In Estonia, each line ministry defines whether SOEs are policy-oriented (i.e. “strategic”) or commercially oriented for the companies in their portfolio. The state’s 2020 consolidated annual report on SOEs summarises each SOE’s orientation as of 2020 (on pp.51‑52). Of note, the four SOEs in the Ministry of Finance’s portfolio (operating in the energy, gambling, real estate and broadcasting sector) are each defined as both policy and commercially oriented.
In Finland, state ownership is based on strategic interests, financial interests or the need to fulfil a specific mission using the legal form of a limited liability company. Strategic interests may relate to national defence, the maintenance of emergency stocks of critical supplies or infrastructure, or the obligation to provide needed basic services. Special assignment companies serve a specific state‑defined purpose, carrying out duties that are best organised in corporate form. The company-specific interests underlying state holdings shape the objectives for state ownership established for individual companies. Additionally, state‑owned investment companies can promote domestic ownership, innovation and climate investments.
In Ireland, according to the Code of Practice for the Governance of State Bodies, there are three types of State bodies: commercial State bodies, non-commercial State bodies and regulatory bodies. Commercial bodies are involved in commercial activities while non-commercial bodies have regulatory, developmental, service delivery or advisory roles. State bodies generally have governing legislation which provides for, inter alia, the appointment (by the relevant Minister) of the board and the chairperson.
In Israel, SOEs are defined as commercially oriented, unless the government has set public policy objectives (often through stipulation in the corporate bylaws) or the SOE has been established as a non-profit company.
In Korea, SOEs are classified as “public institutions” and may take the form of public corporations, quasi-governmental institutions, and non-classified public institutions based on the number of personnel, self-generating revenue, and the amount of total revenue.
Public corporations are divided into market-type public corporations (public corporations whose asset size equals or exceeds two trillion won and whose self-generating revenue out of total revenue equals or exceeds 85%), and quasi-market type public corporations (public corporations other than market-type public corporations). Both market-type and quasi-market type corporations include listed SOEs, and contain the characteristics of both commercial pursuit and public policy enforcement.
Quasi-governmental institutions are divided into fund-management-type quasi-governmental institutions (quasi-governmental institutions to which the management of a fund is assigned or commissioned pursuant to the National Finance Act), and commissioned-service‑type quasi-governmental institutions (quasi-governmental institutions other than fund-management-type quasi-governmental institutions). Public institutions not classified into either public corporations or quasi-governmental institutions are classified as non-classified public institutions.
Overall, quasi-governmental institutions were established more for the purpose of implementing public policies rather than commercial pursuit. However, some quasi-governmental institutions and non-classified public institutions, such as financial institutions, are regarded as pursuing both public policy objectives and commercial activities.
In Latvia, SOEs which are highly dependent on the state budget are classified as dependent non-commercial SOEs, while SOEs which are not dependent on state subsidies or other grants are considered commercial SOEs.
In Lithuania, SOEs can be grouped into three categories: those which provide only public policy-oriented functions (so called “special obligations”), those which provide only commercially oriented functions, and those which provide both types of functions. The criteria distinguishing public-oriented functions from commercial ones are the following:
The obligation to provide functions is set in the law or in the government resolution.
The financing mechanism allows to compensate only incurred expenses or due to regulation provisions, profit, in line with market conditions, is not possible.
The function is of a public administration nature.
However, the remuneration policy of CEOs and board members of both commercially oriented and policy-oriented SOEs is not based on the type of functions performed, as the level of remuneration is mainly based on the size of SOEs and the complexity of their activities.
In Mexico, a decentralised ownership model exists as each line ministry oversees the SOEs in its portfolio. Overall, SOEs are classified into four categories: (i) Decentralised Agencies; (ii) Majority State‑Owned Enterprises (parastatal enterprises) (iii) Public Trust Funds and (iv) State Productive Companies. The two SOEs considered in this report – Comisión Federal de Electricidad (CFE) and Petróleos Mexicanos (PEMEX) – are both classified as State Productive Companies, and are considered as commercial.
In New Zealand, the objectives of SOEs are determined by specific legislative frameworks. Profit-oriented state‑owned commercial companies – locally referred to as SOEs – are governed by the State Owned Enterprises Act 1986. Mixed-objective state‑owned commercial companies are governed by a range of legislation, predominantly the Crown Entities Act 2004 and the Public Finance Act 1989 (Schedule 4a companies). These companies generally have a mix of policy-oriented and commercially oriented objectives. Other forms of profit-oriented, partially owned SOEs include partially listed SOEs, and sovereign wealth funds and independent pension funds.
In Norway, SOEs are assigned to three categories. The companies that primarily operate in competition with others are normally placed in Categories 1 and 2 (commercially oriented), while the companies that do not primarily operate in competition with others are normally placed in Category 3 (public policy-oriented). The Norwegian state’s goal as an owner for companies that are placed in Categories 1 and 2 is the highest possible return over time, while the state’s goal as an owner for companies that are placed in Category 3 is to achieve the most efficient possible attainment of public policy goals.
In the Philippines, SOEs – locally referred to as government-owned or controlled corporations (GOCCs) – are not classified according to their orientation. Alternatively, the remuneration of SOE governing boards is based on a classification scheme anchored on their assets and revenues.
In Switzerland, commercially oriented SOEs carry out activities of economic nature – including offering goods and services under market conditions, while public policy-oriented SOEs either provide services for which competition is not possible or only to a limited extent due to market failure, or fulfil tasks regarding the economic and safety supervision.
In Turkey, SOEs subject to Decree Law no.233 are locally referred to as Public Economic Enterprises (PEE). State Economic Enterprises (SEE) are Public Economic Enterprises which are majority-owned by the state, and are established to operate in open market competition. Public Economic Institutions (PEI) are Public Economic Enterprises which are majority-owned by the state, and are established to offer monopoly goods and services. Of note, this classification has no impact on board remuneration.
In the United Kingdom, many commercially oriented SOEs are classified as ‘public corporations’ by the independent Office of National Statistics, in line with international statistical standards and drawing on the European System of Accounts (ESA) 2010 and the Manual of Government Deficit and Debt, which stipulates that non-financial Public Corporations must derive more than 50% of their production cost from the sale of goods or services at economically significant prices. Overall, commercially oriented SOEs may deliver public policy objectives in addition to their commercial activities.