Introduction
A state-owned enterprise (SOE) is an organization that is owned and managed by the state, usually with the intention of forming an interface between a nations political and economic system. They are usually applied in the context of public investments, such as the provision of public goods, infrastructural projects, or key industries. The form taken by the SOE may vary from country to country, but their purpose and function remains the same—to have a state directed and financed organization for the benefit of the public.
History
The idea of creating a state-owned enterprise that engages in economic activities for public interest has its roots in the Chinese and French empires. The concept of state-owned enterprises in China dates all the way back to 253 BC when the Qin dynasty established porcelain-producing businesses. Meanwhile, in France, Louis XIV created the Compagnie des Indes Orientales (East India Company) in 1664, which served as the precursor to modern SOEs.
The first significant wave of SOE establishment occurred after World War II, when newly reconstituted governments designed these entities to effect domestic change and provide stability. They were instrumental in rebuilding their respective economies and in the process, established the precedent for larger SOEs that we see today.
Corporations
SOEs may take various forms, including corporations and industrial complexes. Corporations are the most common form of SOEs, because they are able to centralize leadership that can be held accountable while still having the flexibility to respond to market demands.
Corporations can vary within different industries, as well as by country. For example, SOE corporations often exist in the energy, transportation, and banking industries, where stability is of the utmost importance. These corporations may be directly owned by the government, or they may be formed as government-owned subsidiaries.
Industrial Complexes
Industrial complexes are another type of SOE. They are usually comprised of many individual entities such as factories, research and development (R&D) centers, and other related businesses, Often, these entities are managed internally as well as externally and may be highly specialized, focusing on a specific industry. Some industrial complexes form joint ventures with other firms in order to pool resources, increase efficiency, and bring access to foreign markets.
Conclusion
State-Owned Enterprises (SOEs) have become a part of our daily lives. From the energy we use to the banking services we depend on, SOEs help to ensure public interests are taken care of, while allowing for economic efficiency and growth. They are not just limited to countries that have a long history of SOE establishment, but have become increasingly common in recently established democracies. In many cases, they have proved to be a key driver of economic progress, providing much needed stability and a reliable source of enterprise.
