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Competitive neutrality means that state-owned and private businesses compete on a level playing field. This is essential to use resources effectively within the economy and thus achieve growth and development. Therefore the principle of competitive neutrality is gaining wide support around the world. But how to obtain it in practice, is a much more difficult question.
The purpose of this report is to help respond to this question. The report identifies the most important issues that governments need to address in order to achieve competitive neutrality. It is framed around eight building blocks, including choosing the best corporate form, achieving a commercial rate of return, accounting for public service obligations, improving debt neutrality, and making public procurement open and transparent. It provides country examples of how to implement competitive neutrality policies in practice.
The report is not about privatisation. Rather, it aims to provide guidance to policy makers who want to make sure that the presence of the state owned enterprises in the market place does not thwart private entrepreneurs, skew competition or lead to other inefficiencies. Understanding how to avoid unintended economic consequences that may follow from state ownership is particularly important for policy makers that face the challenge to balance the commercial objectives of state owned enterprises with other important policy objectives: A challenge that permeates all levels of government.
The book may be read in conjunction with two publicly available stocktaking papers: