OECD calls for reform of governance of state-owned firms in the Middle East and North Africa

Middle Eastern and North African countries should reform the governance of their state-owned enterprises to bring about greater public accountability and improve their efficiency, according to a new OECD report.Towards New Arrangements for State Ownership in the Middle East and North Africa argues that improved corporate governance is key to reducing corruption and restoring confidence in public institutions in the aftermath of the Arab Spring.

State-owned enterprises account for as much as half of the economic output in some MENA countries, the report estimates. They also provide close to 30 per cent of all jobs, compared with 2-3 per cent in OECD countries. More than 30 per cent of the largest listed companies in the region have a state ownership stake, while large unlisted state-owned firms dominate the natural resource sectors.

Policymakers should focus on a number of issues. For instance, in many countries, commercially-oriented activities continue to be performed directly by ministries. With the exception of the telecommunications sector, ownership and regulation functions have not been separated, leading to significant conflicts of interest. In addition, a number of commercial state-owned enterprises are also not subject to corporate legislation, but have special legal regimes which effectively politicise their governance and exempt them from competition and bankruptcy frameworks.

Privatisation is not the only answer to reforming state-owned firms, says the report. Strengthening the governance of firms and increasing transparency and accountability is essential. For example, there should be a clear separation of ownership from regulatory functions to ensure a level playing field and a more competitive business environment. Governments should set clear objectives for firms, giving boards greater autonomy in day-to-day operations, while monitoring their performance.

For more information, journalists should contact Alissa Amico of the OECD’s Corporate Affairs division (tel. alissa.amico).

More information on the report is accessible here.