Share

Investment

Achieving competitive neutrality

 

Competitive neutrality means that state-owned and private businesses compete on a level playing field. This is essential for the effective use of resources within the economy and thus the achievement of growth and development. While the principle of competitive neutrality is gaining wide support around the world, obtaining it in practice is a much more difficult question.

 

The OECD is engaged in multiple projects to assist policy makers in designing, adopting, and implementing appropriate policies. This page provides access to work completed to date.

 

OECD Council Recommendation on Competitive Neutrality

On 31 May 2021, the OECD Council adopted a recommendation establishing a set of principles to ensure that governments’ actions are competitively neutral and that all enterprises face a level playing field, irrespective of factors such as the enterprises’ ownership, location or legal form. It recommends adopting and maintaining neutral market rules, so that adhering governments ensure that the legal framework is neutral and that competition is not unduly prevented, restricted or distorted. Finally the recommendation calls governments to avoid selective advantages and measures that may unduly enhance an enterprise’s market performance and distort competition. Access the full text of the recommendation. 

 

Maintaining competitive neutrality: Voluntary transparency and disclosure standard for internationally active state-owned enterprises and their owners

This voluntary standard outlines a set of best practices for transparency and disclosure by internationally-active SOEs and their owners. The aim of this standard is to complement the existing provisions of the OECD Guidelines on Corporate Governance of State-Owned Enterprises as well as the Recommendation of the OECD Council on Competitive Neutrality. These instruments support the preservation of competitive neutrality. This standard aims to ensure that internationally-active SOEs operate efficiently, transparently and on equal footing with private companies in the global marketplace.

 

Towards a Level Playing Field between SOEs and Private Entities in ASEAN

2018/2021 - In the framework of the OECD project Fostering Competition in ASEAN, a series of reviews assessed issues related competitive neutrality in the sector of small-package delivery services in each of the ASEAN member countries. Access the country reports and related materials.

 

State-Owned Enterprises as Global Competitors: A challenge or an opportunity? (2016)

An estimated 22% of the world’s largest firms are now effectively under state control. The upsurge of state-owned enterprises (SOEs) as global competitors has given rise to concerns regarding their competitive situation. Taking a multidisciplinary approach, the OECD has looked at the issues from the competition, investment, corporate governance and trade policy perspectives.

 

OECD Workshop on SOEs as global competitors (2016)

Some business competitors and observers claim that compensation granted by governments to SOEs in return for public policy obligations carried out at home as well as other advantages enjoyed by SOEs but not privately-owned firms can give SOEs a competitive edge in international markets. The challenge is that in a globalised economy, some state interventionist policies can have beggar-thy-neighbour effects. The risk of not addressing such concerns is that trade and investment partners may revert to protectionist responses, which in turn may discourage much-needed international investment. In this context, the OECD hosted a half-day dialogue on the topic of SOEs as global competitors. 

 

International trade and investment by state enterprises (2015)

The recent surge in competition between state and private firms in global markets calls for a reflection on how to minimise any potentially distortionary effects on international trade and investment created by state enterprises while at the same time restraining any undue protectionist policy responses directed at them. This paper provides an assessment of the extent and nature of existing and potential problems as well as a stocktaking of regulatory approaches that can be used to alleviate them.

 

Financing state-owned enterprises: An overview of national practices (2014)

This book sheds light on how financing decisions are made regarding state-owned enterprises and synthesises national policies and practices. It also examines a broad range of financial transactions and conditions which might make the cost of operating SOEs materially different than for private competitors, and identifies whether any mechanisms are in place to neutralise such differences. 

 

State-invested enterprises in the global marketplace: Implications for a level playing field (2014)

State-owned and other state-invested enterprises (SIEs) have become more prominent in the global economy over the last decade. A growing role for state-invested enterprises in the marketplace is not in itself onerous. According to an OECD consensus, as expressed through the Organisation’s legal instruments, SOEs can be operated according to similarly high standards of governance, transparency and efficiency as private companies, in which case the ownership issue is moot. However, only some of the world’s most advanced economies, following decades of reform of their SOE sectors, have approached this point. Moreover, when SOEs operate across borders the challenges may multiply. With this background, this paper compares the difference between SIEs and non- SIEs in five sectors: air transportation, electricity, mining, oil & gas and telecommunication.

 

State-owned enterprises - Trade effects and policy implications (2013)
With growing integration via trade and investment, state-owned enterprises (SOEs) that have traditionally been oriented towards domestic markets increasingly compete with private firms in the global market place. This paper discusses the extent of state ownership in the global economy, the advantages and disadvantages that SOEs can face, and how potential SOE advantages can generate cross-border effects.

 

Competitive Neutrality: Maintaining a level playing field between public and private business (2012)
Guidance to policy makers who want to make sure that the presence of state- owned enterprises in the market place does not thwart private entrepreneurs, skew competition or lead to other inefficiencies.

 

National Practices concerning competitive neutrality (2012)
This report summarises the responses from 30 OECD countries and the EU to a comprehensive questionnaire concerning national approaches to competitive neutrality.

 

Compendium of OECD recommendations, guidelines and best practices bearing on competitive neutrality (2012)
This report provides a full picture of existing OECD instruments, and related good practices and guidance, which may have implications for competitive neutrality.

 

Competitive neutrality and state-owned enterprises in Australia (2011)
A comprehensive overview of the competitive neutrality framework in Australia following a period of profound competition reforms in the 1990s.

 

State-owned enterprises and the principle of competitive neutrality (2009)
This document compiles proceedings from 2 Competition Policy Roundtables: Application of Antitrust Law to State-Owned Enterprises; and, Corporate Governance and the Principle of Competitive Neutrality.

 

Competitive neutrality and state-owned enterprises (2011)
This paper examines sources of competitive advantages and incentives for SOE managers, boards and government owners to use them and national approaches to countering these practices. It outlines options available to competition agencies to counter anti-competitive practices by SOEs and to help enhance competitive neutrality.

 

Accountability and Transparency: a Guide for State Ownership (2010)
This guide facilitates the practical implementation of the OECD Guidelines on Corporate Governance of State-Owned Enterprises in the areas of transparency and accountability.  It shows, using specific examples, that improvement is politically feasible, taking into account the complex challenges that governments have to face.

 

Visual for the text of the recommendation on competitive neutrality

OECD Council Recommendation on Competitive Neutrality

 

C-N-150x200

Maintaining competitive neutrality: Voluntary transparency and disclosure standard for internationally active state-owned enterprises and their owners

 

 

Competitive neutrality explained in 6 minutes
(
also available in Russian)

 

 

DOCUMENTS AND LINKS

G20/OECD Principles of Corporate Governance

Freedom of investment at the OECD

Competitive neutrality in competition policy

Towards a Level Playing Field between SOEs and Private Entities in ASEAN

Competition assessment toolkit

Fighting bid rigging in public procurement

 

 

     

 

 

 

Related Documents