1.
Corporate Governance and
Performance of SOEs:
Relevance for Iraq
Alissa Amico, Programme Manager,
Middle East and North Africa
Corporate Affairs Division, OECD
16 February, 2015

2.
Guidelines on Governance of SOEs
• OECD Guidelines on Corporate Governance of SOEs (2005)
provide consensus based recommendations
• Developed in extensive consultation with member and non
member countries
– OECD Working Party on State Ownership and Privatisation Practices
• Accompany the OECD Principles on Corporate Governance
and the Methodology
• Address both the state as the owner and the companies’
boards and management
• Apply to companies with state ownership, even if not
controlling
• A legal OECD instrument, aspiration rather than a minimum
standard
• Currently revised to clarify and provide better guidance

3.
Priorities in the OECD Guidelines
•Ensure a level playing field with the private sector
•Reinforce the ownership function within the state administration
•Provide equitable treatment of minority shareholders
•Improve transparency of SOEs’ objectives and performance
•Improve stakeholder relationship
•Strengthen and empower SOE boards
•New chapters on rationale for state ownership and on
competition between SOEs and private companies
•Revised guidelines to be released in 2015

4.
Structure of the OECD Guidelines
• Ratonales for state ownership
• The state’s role as the owner
• State-owned enterprises in the marketplace
• Equitable treatment of shareholders and other investors
• Stakeholder relations and responsible business
• Transparency and disclosure
• The responsibilities of the board of directors

5.
OECD’s work on SOEs in the MENA region
• MENA Taskforce on Corporate Governance of SOEs formed
in 2008
• Annual roundtables in Paris, Rabat, Cairo, Kuwait, Istanbul to
discuss challenges to the exercise of state ownership
• Issue of governance and peformance of SOEs continues to
be of interest for different reasons across the region
• Taskforce supports projects of participating countries
– Codes of CG of SOEs created with OECD support in Egypt, Morocco
and Tunisia
– Workshops to support restructuring and improving competitiveness
– Assist in developing training materials (board guidebook for
Mumtalakat)
• It also works with large MENA SOEs: case studies on leading
MENA SOEs (Oman Oil, Du, Ma’aden, etc.)

6.
MENA state ownership at a glance
• Variable number of SOEs across the MENA region
– (200 in Tunisia, 150+ in Egypt, 350+ in Morocco), most important in
Egypt, Algeria, Syria, Iraq, KSA and the UAE
• Aggregate statistics on SOEs scarce but figures are telling
– in Saudi Arabia, SOEs make up 50 % of non-oil economy
• The extent of state ownership in the region is not declining:
– Privatisation activity declining
– SWFs play an important role as investors
– New SOEs being established or their mandates broadened
– Allegations of crony capitalism/fear of private monopolies
• Operate in a range of sectors
– industrial, services, hydrocarbons, etc
• SOEs are charged with a number of commercial and non-
commercial objectives

7.
Ownership and regulation of SOEs
• Fragmented ownership, no ownership entity or privatisation
entity (except Jordan and Turkey)
• Generally subject to the companies law if corporatised
except Egypt (Public Business Sector Law)
• Less stringent corporate governance rules since many
operate as unlisted companies and/or statutory corporations
• Separation of ownership and regulation is starting to take
place but not in all sectors
• Often exempt (explicitely or implicitely) from competition
regulation
• Strategic SOEs subject to custom governance and
operational arrangements

8.
Major SOE reforms in MENA
• Privatisation wave of 1980-1980 (Egypt, Morocco, Tunisia)
• Limited consolidation of ownership of SOEs (Mumtalakat in
Bahrain, PIF in Saudi Arabia, MOF in Morocco)
• Corporatisation of SOEs to ensure they operate as commercial
companies
• Listing of SOEs equity and debt (STC, Emaar Malls, Du)
• Empowering state audit courts, anti-corruption commissions
• Introducing sectoral regulators (i.e. telecommunications)
• Contractualisation of SOE financial obligations (Morocco, Tunisia)
• Giving major SOEs operational autonomy (Saudi Arabia)
• Introducing guidelines on SOE relations with banks (Egypt, UAE)
and corporate governance guidelines for SOEs

9.
Challenges in reforming SOEs
• National development models depend heavily on SOEs
(Algeria, Iraq, UAE, etc.)
• SOEs fulfill important socio-economic roles,can be politicised
• Existing and new pressure on governments to use SOEs to
address social problems
• Conflicts of interest in governance of SOEs (political
nominations, procurement, role of military, etc.)
• Subsidies to SOEs hard to reduce but some examples (i.e.
hydocarbon products in Egypt)
• Overemployment by SOEs as an exension of the public
sector
• Privatisation of SOEs resisted by employees and the wider
public

10.
Fiscal consequences of SOEs
• Wide variance in the performance of MENA SOEs and their
contribution to the economy
• Many SOEs generate weak or negative revenues (i.e. Electricité
Du Liban)
• Non-commercial activities often weaken SOE books;
compensation often ad hoc
• Managers might not have incentives to ensure profitability
• Multiple channels for SOE subsidisation (cheap loans, feedstock,
sovereign backing, debt to other SOEs, etc.)
• Real cost of SOEs to the public not featured in company books or
national figures
• Net financial flows to SOEs estimated to be substantial
• Dubai crisis exposed risks of reliance on SOE driven growth

11.
• Establish coordinated or centralised ownership
arrangements to improve efficiency of ownership
• Establish benchmarks for performance of SOEs
• Improve the independence of SOE boards
• Review regs and the CG code to see how it is applied
• Conduct a review and costing of SOEs’ social objectives
• Deal with unperforming SOEs, redundant employees
• Review accounting and audit standards for SOEs
• Reinforce powers of competition, state audit, and anti
corruption authorities
• Start with the largest or most “damaging” SOEs (“too big to
fail”)
Regional priorities going forward

12.
• SOEs part and parcel of the economic history of Iraq
• High impact on the economy: 180 SOEs, 630,000
employees
• Common challenges with other MENA countries
• Lack of coordination in ownership and regulation
• Overemployment of SOEs a burden on efficiency
• Weak and politicised boards of directors
• Higher than average corruption in SOEs
• Reliance on SOEs for delivery of social objectives
• SOEs negatively impacting level playing field
• Restructuring of SOEs requires institutional capacity
• OECD Taskforce and Working Party can provide resources
Relevance for Iraq

13.
• Corporatisation to create SOEs important, as is separation
of regulation and ownership
• Analyse and seek to reduce subsidies to SOEs a priority for
government budget (contractualisation)
• Address overemployment challenges (i.e. Turkey model)
• Improve the operation of boards (by setting CG standards
and giving operational autonomy to SOEs)
• Introduce risk management for SOEs (at least large co)
• Consider charging large and leading SOEs with developing
companies in the value chain
• Facilitate investment in SOEs (challenging other than through
market exit)
Improving efficiency of Iraqi SOEs

14.
Relevant publications
• Transparency and Accountability Guide, 2010
• Boards of Directors of State-Owned Enterprises: An Overview of
National Practices, 2013
• Privatisation in the 21st Century: Report on Good Practices, 2009
• SOEs in the Middle East and North Africa: Engines of Development
and Competitiveness?(also in Arabic), 2013
• Towards New Arrangements for State Ownership in the Middle East
and North Africa (also in Arabic), 2012
• Competitive Neutrality: Maintaining a level playing field between
public and private business, May 2012
• The size and sectoral distribution of SOEs in OECD and partner
countries, 2014
• Financing State-Owned Enterprises, 2014

15.
Thank you.
Comments, questions?
Alissa Amico
Project Manager, MENA
Corporate Affairs Division
alissa.amico@oecd.org
+33 1 45 24 83 05