Public policy objectives of state‑owned enterprises

1. State ownership and public policy

Governments use state ownership for a wide range of social, economic and strategic objectives. The rationales underpinning state ownership are important because they shape the objectives assigned to SOEs and help determine whether state ownership remains justified over time. Ownership rationales vary across countries, sectors, and over time, reflecting differences in institutional arrangements, levels of economic development, and evolving public policy priorities and market conditions. SOEs are often prominent in sectors characterised by high barriers to entry (e.g. network sectors), market failures, natural monopoly features, strategic importance and essential service provision. Clearly articulated rationales help translate the justification for state ownership into concrete expectations and outcomes. In this context, public policy objectives (PPOs) translate broad ownership rationales into specific policy outcomes that SOEs are expected to deliver through state ownership such as ensuring energy security, supporting industrial development or safeguarding access to essential services. Public service obligations (PSOs), in turn, represent more concrete obligations, often related to universal access, continuity, quality or affordability of services.

This section provides an analytical starting point for the paper. It introduces key concepts and definitions including an overview of how rationales for state ownership inform PPOs and PSOs. Section 2 examines how objectives are formalised in practice and identifies the types of objectives assigned to and carried out by SOEs. Section 3 covers how objectives are designed, communicated and monitored; and section 4 explains how they are funded, accounted for and evaluated. Lastly, section 5 covers how policy objectives are disclosed, including both by SOEs and by the state owner.

The information is drawn from a questionnaire-based OECD Survey on PPOs in SOEs, complemented by desk research. Respondents to the survey include Australia, Austria, Azerbaijan, Bulgaria, Colombia, Costa Rica, Croatia, Czechia, Estonia, Finland, Germany, Greece, Iceland, Italy, Korea, Latvia, Lithuania, the Netherlands, Norway, Peru, Slovakia, Slovenia, Spain, Sweden, Switzerland and Ukraine.1

1.1. Ownership rationales and the formulation of objectives

State ownership has long been used as a policy instrument to achieve diverse economic and societal goals. Yet, the rationale underpinning why governments own enterprises, and how these rationales may translate into specific PPOs are evolving. As the scale and scope of SOEs have expanded globally, these rationales have taken on renewed relevance in today’s context of expanded SOE presence and evolving state priorities.

The SOE Guidelines (I.A) emphasise that “the ultimate purpose of state ownership of enterprises should be to maximise long-term value for society, in an efficient and sustainable manner.” In practice, the purpose and objectives of state ownership vary among countries and industries and typically represent a mix between social, economic and strategic interests. Clearly articulated ownership rationales, often set out in an ownership policy or equivalent high-level document, provide foundation for guiding decisions on state ownership and their role in the economy. Bulgaria, for example, details its justification for ownership in its Policy on State Participation in Public Enterprises. Czechia identifies strategic priorities in its Strategy of State Ownership Policy. A variety of rationales can be observed across jurisdictions, which are broadly classified into four main categories: national interest or sovereignty; economic development; social or public service; and market structure or correcting market failures (Table 1.1).

Table 1.1. Examples of ownership rationales

Category	Illustrative rationales	Country examples
National interest/ sovereignty	National and economic security Safeguarding national or economic security including control over strategic or critical infrastructure or sensitive industries.	France, Finland: ownership in energy and defence firms to safeguard security interests.
	Strategic sectors and natural resources Ensuring a stable supply of essential goods and services is a common rationale for state ownership, particularly in sectors such as energy.	Slovenia: sustainable forest management and industrial competitiveness; Mexico: national oil company retained for oil and gas supply security.
	Industrial policy and competitiveness Investing in sectors considered vital for economic transformation or technological upgrading.	Lithuania: SOE ownership tied to industrial strategies, start-ups; Korea: SOEs supporting technology-intensive sectors.
	Emergency preparedness and resilience Preparedness for civil protection, emergency/disaster response, or continuity of critical services.	Norway: ownership policy lists “civil protection and emergency preparedness”; Ukraine: electricity SOEs involved in energy security supply during wartime.
Economic development	Sustainable growth and profitability Promote long-term economic growth and wealth, and national or sustainable development.	Lithuania: “State Goals Implemented by SOEs” emphasises dividends; Singapore: state-owned investment firm structured to generate sustainable returns.
	Development finance and capital market development Finance where private markets are underdeveloped or risk averse, crowding in private capital, long-term finance (e.g. infrastructure), deepening domestic financial markets, and promoting domestic capital markets.	Germany: Development bank KfW providing SME and green finance; Brazil: Brazilian Development Bank providing long-term industrial and development finance; South Africa: Development Bank of South Africa financing regional infrastructure.
	Local headquarters and business hubs Ensuring economically strategic firms remain headquartered domestically, supporting national economic development.	Austria: rationale includes retaining domestic headquarters; Finland: state stakes in selected high-tech firms to anchor them locally.
	Regional connectivity and infrastructure Maintaining efficient and accessible transport and infrastructure, supporting regional development.	France: continued ownership of railway company; South Africa: ensuring transport connectivity through state ownership.
	Research and innovation Drive national research and innovation agendas.	Slovenia: SOEs referenced in research and innovation mandates; China (People’s Republic of): selected SOEs spearhead innovation in strategic technologies.
Social/public service	Universal access and public service provision Affordable and equitable access to essential services, such as healthcare, postal delivery, utilities, housing, especially where not provided by the market or insufficiently.	Sweden: state ownership of postal services; Brazil: affordable social housing.
Market structure/ corrective actions	Monopolies (policy and natural) Regulate the availability and consumption of certain products such as alcohol or gambling. For natural monopolies, such as rail networks, duplicating infrastructure is deemed economically inefficient.	Norway: state monopolies in alcohol and gambling; Ukraine: SOEs retained in electricity transmission as a natural monopoly.
	Financial stability or safeguard supply Temporary ownership in distressed firms to safeguard supply or systemic stability.	Ireland: state stakes in banks after the Global Financial Crisis. 1

1. In October 2025, the Irish Government commenced a process to divest its last remaining bank shares.

Source: OECD (2026[1]) Good practices for strengthening state ownership, https://doi.org/10.1787/bf84ff64-en.

Rationales are generally consistent with the government’s overall priorities for state ownership and can be dynamic, evolving with changing economic realities, policy goals and market conditions. Over time, the evolution of ownership rationales has directly shaped how governments define and assign PPOs to SOEs, translating broad ownership rationales into more specific, outcome‑oriented policy objectives. SOEs may play a role in fostering regional or sustainable development2, or be assigned to lead in emerging industries such as clean energy or digital infrastructure. While not all SOEs need to be tasked with the pursuit of policy objectives, as new priorities emerge, ranging from sustainability, energy security and resilience, to innovation and digitalisation, many governments have adjusted the objectives of SOEs accordingly.

The SOE Guidelines do not take a position on whether specific activities are best undertaken in public or private ownership, as this depends on factors related to market conditions, the national economy and domestic policy choices. However, where PPOs are pursued through SOEs, it is important to ensure the ownership rationale accurately reflects the current policy goals that SOEs are expected to pursue. As a result, a change in the ownership rationale may affect the policy objective assigned to an SOE. While ownership rationales are often articulated in broad terms, they should be sufficiently specific to avoid creating open‑ended justifications for state ownership or leaving excessive discretion in the definition and implementation of PPOs.

The relationship between ownership rationales, PPOs and PSOs is illustrated in Figure 1.1.

Figure 1.1. From ownership rationales to PPOs and PSOs

1.2. Definitions of PPO and PSO

Building on the distinction between ownership rationales, PPOs and PSOs outlined above, the SOE Guidelines provide definitions intended to clarify the relationship between these concepts and their application in practice (Box 1.1). The SOE Guidelines clarify that PSOs constitute a distinct subset of PPOs, translating certain public‑interest objectives into enforceable service obligations. PSOs can be placed on an SOE or other market participants to provide an essential service that would otherwise not be delivered by the market. PPOs, in turn, encompass objectives that advance a public interest goal – such as sustainability, resilience or regional development – which may or may not be pursued through SOEs.

Box 1.1. Definitions of PPOs and PSOs in the SOE Guidelines

Definition of public policy objectives (PPOs):

“PPOs are objectives benefitting the public interest within the jurisdiction concerned. These could include carrying out of public service obligations as well as other special obligations undertaken in the public interest which can be set in addition to financial performance objectives. In many cases, PPOs might otherwise be achieved via government agencies, but have been assigned to an SOE for efficiency or other reasons.”

Definition of public service obligations (PSOs):

“PSOs are obligations placed upon providers of public services in order to ensure the intended users’ appropriate access to essential economic or social services, which would not be provided by the market, or in a manner sufficient to fulfil the PSO, under commercial considerations. While the design and mechanisms for the implementation of PSOs can vary greatly amongst jurisdictions, PSOs may for example consist of universal service and/or affordability requirements imposed on providers of public services.”

Source: OECD (2024[2]), OECD Guidelines on Corporate Governance of State‑Owned Enterprises 2024, https://doi.org/10.1787/18a24f43-en

Although the design and scope of PPOs and PSOs are defined and applied differently across jurisdictions (OECD, 2024[3]), important conceptual distinctions can nevertheless be identified. These distinctions can be observed across the following three dimensions:

• Nature and scope. PPOs are often strategic objectives that serve the public interest and reflect wider policy goals. PSOs, by contrast, are obligations imposed on specific market actors to achieve a particular outcome, often in pursuit of a public service goal. For example, in France, the state defines broad PPOs for the energy transition for its state-owned electricity generation company, EDF, while separately imposing specific PSOs relating to regulated tariffs and affordability.

• Legal and operational form. PPOs can be policy mandates or ownership expectations. Such objectives do not necessarily need to be implemented through SOEs; they can also be pursued through initiatives led by government institutions or agencies, or even through regulation. However, such objectives may be assigned to SOEs for reasons of efficiency or practicality. PSOs, by contrast, are obligations placed on SOEs or other market participants. They exist to guarantee access to essential economic or social services that would not be adequately provided by the market alone. In Norway, state ownership policies set expectations for value creation and sustainability across SOEs (PPOs), whereas universal service obligations in sectors like postal services are formally assigned to designated operators through legislation (PSOs).

• Economic and financial treatment. Both PPOs and PSOs may involve economic activities. PPOs are often pursued under commercial considerations, sometimes alongside financial performance objectives, though certain cases may justify targeted public support. PSOs, by contrast, typically entail a financial burden linked to affordability or universal access requirements which would not be met if prices were determined solely by commercial considerations. They may be backed by specific compensation arrangements that cover the costs of the obligation. Compensation should never be used for financing SOEs’ economic activities other than PSOs. The EU framework surrounding Services of General Economic Interest provides a useful reference point in this context (Box 1.2).

Although the SOE Guidelines do not apply to SOEs operating purely on a non-profit or cost recovery basis, SOEs solely carrying out a PSO should be expected to follow relevant provisions, including those related to governance, sustainability, integrity and transparency. To maintain competitive neutrality, enterprises fulfilling PSOs should receive transparent and market-consistent compensation preventing undue advantage or hidden subsidies. Section 4.1 explores this topic in greater depth and reviews relevant country practices.

Box 1.2. The EU framework bearing on Services of General Economic Interests

The EU framework bearing on Services of General Economic Interests (SGEIs) provides a valuable reference point to the discussion on PPOs and PSOs in the EU context. SGEIs are economic activities that public authorities consider essential and which would not be supplied by the market alone, though they would be supplied under different conditions (European Commission, 2013[4]). Typical examples include public transport, energy supply, waste management, postal services, and certain social services (European Commission, 2013[4]; Centre on Regulation in Europe, 2013[5]; OECD, 2006[6]).

Core mechanisms:

• Entrustment act. A SGEI may be formally assigned through an act of entrustment, which defines the PSO, specifies the provider (SOE or other market actor), sets the duration of the public service delivery and establishes specifications for compensation.

• Compensation and state aid control. Compensation is not considered state aid if all Altmark criteria are met, which include: (1) clear public service obligation, (2) no overcompensation, (3) objective parameters for compensation established in advance, (4) the service provider is chosen in a public tender or compensation is benchmarked against a well-run undertaking.

• Procurement. Classification of a public service obligation as SGEI does not exempt it from procurement law or concession rules.

Source: (European Commission, 2013[4]; Centre on Regulation in Europe, 2013[5]; OECD, 2006[6]).

1.3. Operational challenges and level playing field

Effective PPO frameworks seek to reconcile policy objectives with efficient and commercially sustainable SOE operations. To remain credible and proportionate, PPOs and PSOs should remain aligned with the state’s ownership rationales, clearly defined mandates and principles of good governance. Transparency regarding the objectives assigned to SOEs, and their justification, is important to maintain public trust, accountability and a level playing field.

At the same time, the design and implementation of these frameworks can create important governance and operational challenges, including decisions relating to pricing, service provision or other obligations imposed on SOEs. In some jurisdictions, dispersed ownership may weaken oversight of PPO implementation, while close proximity to policy or regulatory functions can increase exposure to political interference, conflicts of interest or give rise to market distortions. Maintaining a clear separation between these functions therefore remains important to preserve competitive neutrality and avoid preferential or market-inconsistent treatment of SOEs.

Separating ownership from these other functions helps ensure that public policy interests and obligations are assigned through appropriate mechanisms, including through competitive means, rather than through informal shareholder influence. While the boundaries between these functions may overlap in practice, clearly defining their respective roles and responsibilities remains important for effective SOE governance and competitive neutrality.

Earlier OECD studies have highlighted that multiple or poorly defined objectives can create tensions with commercial performance and market neutrality (OECD, 2023[7]). The use of state intervention, including through the instrumentalisation of SOEs, has raised concerns about potential market distortions.3 Given SOEs’ growing role in the global marketplace (OECD, 2024[8]), and the emergence of new priorities motivating state intervention in the market, the nature of PPOs has become a topic of growing interest that this report aims to address. Section 2 examines how PPOs and PSOs are formalised and implemented in practice against these developments.

Key findings – Consistency in ownership rationales and policy objectives

States should ensure that PPOs and PSOs assigned to SOEs are consistent with the state’s rationale for enterprise ownership. Key findings demonstrate that:

• Establish and regularly review the ownership rationale. Several countries, including Bulgaria and Czechia, clearly articulate why the state owns each SOE and the specific policy interests it is expected to pursue in high-level policy documents such as an ownership policy. Where PPOs or PSOs evolve, several jurisdictions have built in mechanisms to periodically review and update the ownership rationale to ensure it reflects evolving policy priorities and owners’ expectations.

• Establish robust and transparent PPO and PSO frameworks. Frameworks where PPOs are articulated and PSOs are established clearly, such as in countries following the EU framework bearing on SGEIs, assign obligations through formal mandates and disclose them publicly. This provides a basis for transparent, proportionate and market‑consistent financing and compensation arrangements.

Notes

← 1.  The survey focused on up to five central SOEs per jurisdiction engaged in economic activities and tasked with delivering PPOs and/or PSOs. Coverage was limited to SOEs owned or controlled by the state through majority ownership or equivalent decisive influence. SOEs operating exclusively on a cost-recovery or non-profit basis were excluded. The sectoral scope includes energy, transportation, finance, telecommunications, postal services, manufacturing, real estate, and other economic activities, following the two-digit ISIC classification. To support comparability, the analysis applies the definitions set out in the SOE Guidelines. In rare instances, country reported information, such as country-specific classifications of what constitutes a policy objective, were revised to ensure consistency with the SOE Guidelines. The report combines comparative analysis with illustrative country examples to identify common practices, challenges, and emerging approaches related to the design, funding, oversight, and disclosure of PPOs and PSOs.

← 2.  Earlier OECD studies have also documented the use of SOEs as tools for development policies and strategies for targeted intervention in specific sectors and/or economic zones (OECD, 2015[13]).

← 3. For instance, SOEs operating in the steel sector have significantly contributed to global overcapacity, as many countries maintain high levels of production despite market downturns. High exit barriers, such as the costs of plant closures and environmental cleanups, further exacerbate the situation, allowing inefficient capacity to persist. Concerns have also been raised around the preferential treatment of these SOEs (as the recipients of subsidies or other forms of support) distorting market competition, and delaying necessary adjustments to production (OECD, 2024[14]; 2015[15]).