BIZweek n°289 8 mai 2020
BIZweek n°289 8 mai 2020
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  • Parution : n°289 de 8 mai 2020

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

  • Format : (260 x 370) mm

  • Nombre de pages : 8

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VENDREDI 08 MAI 2020 BIZWEEK ÉDITION 289 [Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department/Paulo Medas, Deputy Division Chief in the IMF’s Fiscal Affairs Department/John Ralyea, Senior Economist in the IMF’s Fiscal Affairs Department] POST SCRIPTUM INTERNATIONAL MONETARY FUND State-Owned Enterprises in the Time of COVID-19 The pandemic has highlighted the role of the public sector in saving lives and livelihoods. State-owned enterprises are part of that effort. They can be public utilities that provide essential services. Or public banks that provide loans to small businesses. But some are also struggling and adding to the burden on government finances. These range from national oil companies that are dealing with a large fall in oil prices, to national airlines without enough passengers traveling Most people encounter stateowned enterprises every day. They are likely to provide the water you drink, the electricity you use, and the bus or metro you ride to work or school. They come in all shapes and sizes. Some are fully owned by the government and some are jointly owned with private investors. Our new Fiscal Monitor delves into this other government. How have state-owned enterprises evolved in recent decades ? How can countries get the most out of them ? At their best, they can help countries achieveeconomic and social goals. At their worst, they need large bailouts from taxpayers and hinder economic growth. Which version you get boils down to good governance and accountability. Big and complicated State-owned enterprises are present in all countries. In some, like China, Germany, India, and Russia, they number in the thousands. They are major players in many economies. For example, state-owned enterprises undertake 55 percent of total infrastructure investment in emerging and developing economies. Some are also multinationals, operating around the world. The share of state-owned enterprises among the world’s 2000 largest firms doubled to 20 percent over the last two decades, driven by state-owned enterprises in emerging markets—their assets are worth $45 trillion, equivalent to half of global GDP. The relationship between governments and state-owned enterprises is not always straightforward. Governments create the enterprises to meet specific goals and mandates, such as the provision of water, electricity, or transportation routes that the private sector would not find profitable. However, these mandates are often not appropriately funded, with consequences for people’s lives. State-owned enterprises are falling short in many developing countries, where more than 2 billion people remain without access to safe water and more than 0.8 billion lack reliable electricity. Public banks are another example. Governments, such as in Brazil, Canada, Germany, and India have asked their public banks to help alleviate the impact of the current pandemic. However, many public banks have a poor record in promoting economic development (their main goal) and may take excessive risks, which leaves economies and people more vulnerable to crises. Unfair advantage Governments also struggle to effectively monitor state-owned enterprises. Many lack the capacity to do so. Poor transparency in public banks’and enterprises’activities remains an obstacle to accountability and oversight. This can lead to a build-up of large and hidden debts with governments having to bail them out, sometimes costing taxpayers more than 10 percent of GDP. In these cases, the enterprises tend to underperformrelative to their private sector peers. Drawing from a sample of about 1 million firms in 109 countries, we find that state-owned enterprises are less productive than private firms by one-third, on average. This weak performance is partially due to poor governance  : productivity of these enterprises in countries with perceived lower corruption is more than three times higher than those in countries where corruption is seen as severe. The internationalization of state-owned enterprises has also intensified concerns that they have an unfair advantage over private firms because of government support including cheap loans or tax benefits. This worry has long been present in domestic markets, but it has recently spilled across national borders and could fuel protectionist measures. Bang for the taxpayer’s buck In a time when governments are facing increasing demands and struggle with high debt, a core principle for state-owned enterprises is not to waste public resources. We make four main recommendations for how countries can improve the performance of state-owned enterprises  : 1. Governments should regularly review if an enterprise is still necessary and whether it delivers value for taxpayers’money. For example, Germany conducts biennial reviews. The case for having a state-owned enterprise in competitive sectors, such as manufacturing, is weaker because private firms usually provide goods and services more efficiently. 2. Countries need to create the right incentives for managers to performand government agencies to properly oversee each enterprise. Full transparency in the activities of the enterprises is paramount to improve accountability and reduce corruption. Including stateowned enterprises in the budget and debt targets would also create greater incentives for fiscal discipline. Many aspects of these practices are in place, for example, in New Zealand. 3. Governments also need to ensure stateowned enterprises are properly funded to achievetheir economic and social mandates, such as in Sweden. This is critical in responding to crises—so that public banks and utilities have enough resources to provide subsidized loans, water, and electricity during this pandemic—and in promoting development goals. 4. Ensuring a fair playing field for both state-owned enterprises and private firms would have positive effects by fostering greater productivity and avoiding protectionism. Some countries already limit preferential treatment of stateowned enterprises, like Australia and the European Union. Globally, a potential way forward is to agree on principles to guide state-owned enterprises’international behaviour. The stakes are high. Well-governed and financially healthy state-owned enterprises can help combat crises such as the pandemic and promote development goals. However, to deliver on these, many need further reforms. Otherwise, the costs to society and the economy can be large. 4
VENDREDI 08 MAI 2020 BIZWEEK ÉDITION 289 Coronavirus  : EU predicts‘recession of historic proportions’The European Union has predicted « a recession of historic proportions » due to the impact of the coronavirus with a drop in output of more than 7 percent, as it released its first official forecast of the damage the pandemic is inflicting on the bloc’s economy. The 27-nation EU economy is expected to contract by 7.5 percent this year, before growing by about 6 percent in 2021. « Europe is experiencing an economic shock without precedent since the Great Depression, » EU Economy Commissioner Paolo Gentiloni said in a statement. « Both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country’s financial resources. » While the virus hit every member country, the extent of the damage it ultimately inflicts will depend on the evolution of the disease in each of them, the resilience of their economies and what policies they put in place to respond. Italy, Greece, Spain and Portugal will be among the hardest-hit by the economic effects of the pandemic, while Luxembourg, Malta and Austria are to weather the shock better. Greek GDP is to contract the most, by 9.7 percent, with Italy recording the second-deepest recession of 9.5 percent and Spain 9.4 percent. ACTA PUBLICA European Union (EU) says bloc experiencing biggest shock since Great Depression as economy projected to contract by 7.5 percent in 2020 Italy, the EU country hardest hit by the coronavirus, will see its budget deficit surge the most, to 11.1 percent of GDP this year from 1.6 percent last year, but it will fall back to 5.6 percent in 2021, the Commission forecast. Spain’s deficit will just exceed 10 percent this year,up from 2.8 percent in 2019, and France will be close behind with a budget gap of 9.9 percent this year. The Commission expects it to fall to 4.0 percent next year. Italy’s public debt willalso record the biggest increase this year to 158.9 percent of GDP from 134.8 percent in 2019. It is seen falling to 153.6 percent in 2021, the Commission said. COMESA  : Restrictions on Cross Border Movement Affecting Seed Supply Chain Restrictions on cross border movement imposed in response to the Coronavirus pandemic by countries in the region, have adversely affected the supply of seeds which may lead to food insecurity. Hence, the African Seed Trade Association (AFSTA) and the COMESA Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA), recommends classification of seeds as essential commodities that should be allowed unrestricted movement across the region. « If the seed movement is not normalized in the next six months, 123 million out of 650 million people in the COMESA region will face starvation, » according to COMESA/ACTESA Seed Expert Dr John Mukuka. Dr Mukuka said a few countries have reported difficulties to move seeds across borders. If this trend continues, there will be inadequate harvests, a situation that will lead to food insecurity, malnutrition and hunger the COMESA and African countries, in the next few months. « Closing borders or even slowing down the transboundary movement of seeds could create a significant problem in the seed supply chain, » Dr Mukuka said noting that regional countries need to ensure access to quality and improved seed for the 80 million small scale farmers in the COMESA region and beyond. Mitigate risk of crop failures Dr Mukuka observed that no country today could fully supply farmers with quality seed of their choice solely from their own production. Hence, companies produce seed in different countries all over the world including COMESA, to mitigate the risk of crop failures due to adverse weather conditions. « By finding optimal locations for seed production, timing of harvest, and localized expertise, the seed sector ensures steady supply of seed for farmers everywhere in the region and globally, » he said. Dr Mukuka said ACTESA and AFSTA thus appeals to Member States to allow free movements of seed at this time of the year in line with international standard practice of seed trade and in conformity with COMESA Seed Harmonisation Implementation Plan (COMSHIP). This includes  : facilitating the movement of seed within the region in line with the COMESA Harmonised Seed Trade Regulations ; application of phytosanitary measures for seed only for pests, which are not common to all COMESA countries ; use the COMESA Regional Seed certificates and labels for all seed meeting the COMESA Seed Standards among others Since 2010 COMESA/ACTESA has been working with AFSTA on the implementation of COMSHIP. AFSTA has more than 118 Members from 39 countries of which 27 are National Seed Trade Associations (NSTAs) in Africa and 44 associate members worldwide. ACTESA is a specialized agency of COMESA formedto address staple food production and marketing in the region. 5

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