Belgium has about (around) 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority: for a full listing on the companies located in Wallonia, see www.actionnariatwallon.be. There is no equivalent website for companies located in Flanders or in Brussels. Private enterprises are allowed to compete with SOEsunder the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists. Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to legacy networks that were fully amortized years ago. However, former telecom monopolist Proximus still features on the EU’s list of companies receiving state aid.
Belgium currently has no scheduled privatizations. There are ongoing discussions about the relative merits of a possible privatization of the state-owned bank Belfius and the government share in telecom operator Proximus, . There are no indications that foreign investors would be excluded from these eventual privatizations.
France and Monaco
7. State-Owned Enterprises
The 11 listed entities in which the French State maintains stakes at the federal level are Aeroports de Paris (50.63 percent), Airbus Group (10.96 percent), Air France-KLM (14.29 percent), EDF (83.58 percent), ENGIE (23.64 percent), Eramet (25.57 percent), La Française des Jeux (FDJ) (21.91 percent), Orange (a direct 13.39 percent stake and a 9.60 percent stake through Bpifrance), Renault (15.01 percent), Safran (11.23 percent), and Thales 25.68 percent). Unlisted companies owned by the State include SNCF (rail), RATP (public transport), CDC (Caisse des depots et consignations) and La Banque Postale (bank). In all, the government has majority and minority stakes in 88 firms, in a variety of sectors.
Private enterprises have the same access to financing as SOEs, including from state-owned banks or other state-owned investment vehicles. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. SOEs may get subsidies and other financial resources from the government.
France, as a member of the European Union, is party to the Agreement on Government Procurement (GPA) within the framework of the World Trade Organization. Companies owned or controlled by the state behave largely like other companies in France and are subject to the same laws and tax code. The Boards of SOEs operate according to accepted French corporate governance principles as set out in the (private sector) AFEP-MEDEF Code of Corporate Governance. SOEs are required by law to publish an annual report, and the French Court of Audit conducts financial audits on all entities in which the state holds a majority interest. The French government appoints representatives to the Boards of Directors of all companies in which it holds significant numbers of shares, and manages its portfolio through a special unit attached to the Ministry for the Economy and Finance Ministry, the shareholding agency APE (Agence de Participations de l’Etat). The 2018-2019 APE annual report depicted a “State that invests in the future and protects its sovereignty.” The State as a shareholder must set an example in terms of respect for the environment, gender equality and social responsibility. The report also highlighted that the State must protect its strategic assets and remain a shareholder in areas where the general interest is at stake.
The government was due to privatize many large companies in 2019, including ADP and ENGIE in order to create a €10 billion ($11 billion) fund for innovation and research. However, the program was delayed because of political opposition to the privatization of airport manager ADP, regarded as a strategic asset to be protected from foreign shareholders. The government succeeded in selling in November 2019 a 52 percent stake in gambling firm FDJ. The government continues to maintain a strong presence in some sectors, particularly power, public transport, and defense industries.
7. State-Owned Enterprises
The Italian government has in the past owned and operated a number of monopoly or dominant companies in certain strategic sectors. However, beginning in the 1990s and through the early 2000s, the government began to privatize most of these state-owned enterprises (SOEs). Notwithstanding this privatization effort, the GOI retains 100 percent ownership of the national railroad company (Ferrovie dello Stato) and road network company (ANAS), both of which merged in January 2018. The GOI holds a 99.56 percent share of RAI, the national radio and television broadcasting network; and retains a controlling interest, either directly and/or through the state-controlled sovereign wealth fund Cassa Depositi e Prestiti (CDP), in companies such as shipbuilder Fincantieri (71.6 percent), postal and financial services provider Poste Italiane (65 percent), electricity provider ENEL (23.6 percent), oil and gas major Eni (30 percent), defense conglomerate Leonardo-Finmeccanica (30.2 percent), natural gas transmission company Snam (30.1 percent), as well as electricity transmission provider Terna (29.85 percent).
However, these companies are operating in a competitive environment (domestically and internationally) and are increasingly responsive to market-driven decision-making rather than GOI demands. In addition, many of the state-controlled entities are publicly traded, which provides additional transparency and corporate governance obligations, including equitable treatment for non-governmental minority shareholders. Italy’s parastatals (CDP, Ferrovie dello Stato, Eni, ENEL, ENAV, Poste Italiane and Leonardo) generated EUR 2.4 billion return on investment in 2018 for the GOI. The largest contributor was CDP (EUR 1.256 billion) and the second largest was Eni (EUR 671 million).
SOEs are subject to the same tax treatment and budget constraints as fully private firms. Additionally, industries with SOEs remain open to private competition.
As an EU member, Italy is covered by EU government procurement rules. As an OECD member, Italy adheres to the Guidelines on Corporate Governance of State-owned Enterprises.
In 2016 the Italian government committed to privatize EUR 16 billion in state-owned assets, although ensuing privatizations have not achieved this target. The privatizations fall into two categories: minority stakes in SOEs and underutilized real estate holdings. In 2016, the GOI sold a minority stake in the air traffic controller (ENAV). Revenues in 2016 were well below expectations due to the unfavorable markets that resulted in the postponement of other planned privatizations, including a minority share of the national rail network (Ferrovie dello Stato) and the national postal provider (Poste Italiane). The GOI’s budget planning document estimates that in 2020-2021 it will accrue EUR 3 billion in revenues from privatizations.
The GOI solicits and actively encourages foreign investors to participate in its privatizations, which are non-discriminatory and transparent. The GOI sells SOE shares through the Milan Stock Exchange (Borsa Italiana), while real estate sales are conducted through public bidding processes (typically online). The Italian Public Property Agency (Agenzia del Demanio) administers real estate sales: https://venditaimmobili.agenziademanio.it/AsteDemanio/sito.php. The Agency has created a centralized registry with information on individual parcels for sale or long-term lease: http://www.investinitalyrealestate.com/en/.
7. State-Owned Enterprises
The most prominent state-owned enterprise (SOE) in Luxembourg is POST (formerly P&T, postal and telecommunications), whose sole shareholder is the government of Luxembourg and whose board of directors is composed of civil servants. POST responded to the competition created by private players in the market (Orange, Proximus) by transforming itself from a passive utility company into a commercial enterprise, recruiting from the corporate sector, and improving consumer products and services. POST also publishes an annual report and communicates in a similar manner to a private company.
Another sector in which SOEs have been very active is the energy sector (electric and gas utilities), which is now liberalized as well. Anyone can become a provider or distributor (via networks) of electricity and gas. The former state electricity utility, Cegedel, was absorbed into a private company, Encevo, along with a nearby German utility and the former state gas utility, with an independent board of directors. Creos, the new distribution network for energy, is jointly held by the government and private shareholders.
Finally, an important market which does retain barriers to entry is freight air transport, due to the dominance of the majority state-owned Cargolux. It is the largest consumer of U.S. production in Luxembourg in terms of value, owing to its all-Boeing fleet of 27 747-freighter aircraft (including 14 of the new-generation 747-8F, of which Cargolux was a launch customer). It received a capital increase from the Luxembourg government in return for a larger state ownership share of the company.
China has invested in Cargolux, with a Chinese regional fund currently holding approximately one-third of the shares. Cargolux has aggressively expanded in China.
Private enterprises can compete with public enterprises in Luxembourg under the same terms and conditions in all respects. All markets are now open or have been liberalized via EU directives to encourage market competition over monopolistic entities. There is a national regulator (National Institute of Regulation), which sets forth regulations and standards for economic sectors, mostly derived from EU directives transposed into local law. While markets continue to open, the government has maintained a large enough stake in critical sectors such as energy, to ensure national security.
OECD Guidelines on Corporate Governance of SOEs
Luxembourg is an OECD member with established practices consistent with OECD guidelines as far as SOEs are concerned. There is no centralized ownership entity that exercises ownership rights for each of the SOEs.
In general, if the government has a share in an enterprise, government officials will receive board of directors’ seats on a comparable basis to other shareholders and in proportion to their share, with no formal management reporting directly to a line minister.
Court processes with regard to SOEs are transparent and non-discriminatory.
Foreign investors can participate equally in ongoing privatization programs, and the bidding process is transparent with no barriers erected against foreign investors at the time of the initial investment or after the investment is made. Moreover, there are no laws or regulations specifically authorizing private firms to adopt articles of incorporation or association, which limit or prohibit foreign investment, participation, or control, and there are no other practices by private firms to force local ownership or restrict foreign investment, participation in, or control of domestic enterprises. There has been no evidence to suggest that potential conflicts of interest. Government officials sitting on boards of directors do not appear to have impacted freedom of investment in the private sector.
7. State-Owned Enterprises
The Dutch government maintains an equity stake in a small number of enterprises and some ownership in companies that play an important role in strategic sectors. In particular, government-controlled entities retain dominant positions in gas and electricity distribution, rail transport, and the water management sector. The Netherlands has an extensive public broadcasting network, which generates its own income through advertising revenues but also receives government subsidies.
Private enterprises are allowed to compete with public enterprises with respect to market access, credits, and other business operations such as licenses and supplies. Government-appointed supervisory boards oversee state-owned enterprises (SOEs). In some instances involving large investment decisions, SOEs must consult with the cabinet ministry that oversees them. As with any other firm in the Netherlands, SOEs must publish annual reports, and their financial accounts must be audited.
The Netherlands fully adheres to the OECD Guidelines on Corporate Governance of SOEs.
There are no ongoing privatization programs in the Netherlands.
Switzerland and Liechtenstein
7. State-Owned Enterprises
The Swiss Confederation is the largest or sole shareholder in Switzerland’s five state-owned enterprises (SOEs), active in the areas of ground transportation (SBB), information and communication (Swiss Post, Swisscom), defense (RUAG, which was divided into two companies in January – see below), and aviation / air traffic control (Skyguide). These companies are typically responsible for “public function mandates,” but may also cover commercial activities (e.g., Swisscom in the area of telecommunications).
SOEs typically have commercial relationships with private industry. Private sector competitors can compete with SOEs under the same terms and conditions with respect to access to markets, credit, and other business operations. Additional publicly owned enterprises are controlled by the cantons in the areas of energy, water supply, and a number of subsectors. SOEs and canton-owned companies may benefit from exclusive rights and privileges (some of which are listed in Table A 3.2 of the WTO Trade Policy Review – https://www.wto.org/english/tratop_e/tpr_e/tp455_e.htm).
Switzerland is a party to the WTO Government Procurement Agreement (GPA). Some areas are partly or fully exempted from the GPA, such as the management of drinking water, energy, transportation, telecommunications, and defense. Private companies may encounter difficulties gaining business in these exempted sectors.
In the aftermath of a 2016 cyberattack, the Federal Council reviewed RUAG’s structure in light of cybersecurity concerns for the Swiss military, and decided in June 2018 to split the company. Swiss defense and aerospace company RUAG was split into two holding companies as of January 1, 2020. One, MRO Switzerland, will remain state-owned and provide essential technology and systems support to the Swiss military. The other, RUAG International, includes non-armaments aviation and aerospace businesses, and will be fully privatized in the medium term, according to the Swiss government.