Global survey reveals mixed perceptions of state-owned enterprises
LONDON, 1 NOVEMBER 2010 – The recent financial crisis and the subsequent recession have renewed the general awareness of the important role state-owned enterprises (SOEs) play in many national economies. Although there is a general perception that SOEs underperform the private sector, nearly 40% of 12,000 citizens of 24 countries interviewed believe that SOEs deliver better service than the private sector, according to Government as best in class shareholder, by professional services organization Ernst & Young.
The survey results reveal that in terms of public perception state-owned enterprises can match or even exceed private company performance. The results varied considerably by country. Saudis were the most favorably disposed to SOEs, with nearly two-thirds of those surveyed saying they delivered better service than private firms. India (60%) and Spain (51%) were the only other two countries where a majority agreed with this. South Africans (17%), Japanese and Indonesians (both at 29%) were the most skeptical.
Philippe Peuch-Lestrade, Global Government & Public Sector Leader at Ernst & Young, says, “The impression of state-owned enterprises around the world is more complex than some observers, particularly in some developed markets, see it. In countries where state-owned enterprises are more common, their importance is understood and often supported by the public. The presence of SOEs remains lower in countries where the state traditionally plays a minor role such as in the US and in the UK. In most countries, however, SOEs remain a key part of strategic industries, such as those dealing with power and communication, and transport.”
Quality and/or efficiency
Appreciating the quality of services that SOEs provide, however, does not necessarily mean citizens perceived them to be more efficient. Only in France did a majority of those polled believe that SOEs are more efficient than private companies. In India, despite the fact that a high proportion of people believed SOEs provided better service, only 12% agreed they were more efficient.
Peuch-Lestrade continues, “The survey clearly shows that there are cases where the quality of the services provided by SOEs is more important in citizens’ minds than cost efficiency in providing those services. India is a prime example of this.”
The right management
For the two countries where the perception of service quality of SOEs is most positive, (India, 53% and Saudi Arabia, 59%) a majority believes that managers in SOEs are better than in private firms. In particular, Indian SOEs, with their professional and autonomous management, receive positive recognition by Indian citizens. In contrast, only 17% of French citizens consider managers from SOEs to be better than those in private firms, despite their positive views on SOEs’ efficiency.
National interest and big industries ownership
The impact of the financial crisis is seen most acutely when citizens were asked if it is in their countries’ interest that industries perceived to be important or sensitive should be controlled by the government. Results range from 86% in Saudi Arabia, 83% in Russia, 72% in China and 43% in Brazil, to 35% in the US and 16% in South Africa.
In particular, respondents believe that governments should own organizations that operate in sectors such as defense (86%), postal services (71%) and banking (56%).
Unsurprisingly perhaps, 88% of all respondents believe that SOEs are under political control, ranging from 80% of Germans to 96% of Indians. Such perceptions pose a great challenge for Governments, which are increasingly asked to provide more independent governance structures for SOEs.
Peuch-Lestrade concludes, “SOEs have grown in importance and will remain important players in the world economy as China and India, where SOEs are prevalent, continue their rapid economic expansion. Also boosting SOEs will be the controlling investments made by sovereign wealth funds and the effects of the financial crisis, which have pushed governments from across the political spectrum to nationalize a range of private companies.”
About the report
This study was carried out by Ernst & Young and the collaboration of Ipsos Mori and SDA Bocconi School of Management and Bennett Voyles. The survey of 12,000 citizens in 24 countries was conducted in April 2010.
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