Trade barriers and distortions are often the root causes of “bribery” and a reduction in “bribery” will not be achieved without a reduction in trade barriers and distortions.
The recent 2025 National Trade Estimate Report on Foreign Trade Barriers makes for an interesting read (or browse as it is 397 pages).
Among other things, the NTE report “classifies foreign trade barriers in 14 categories. These categories cover measures and policies that restrict, prevent, or impede the international exchange of goods and services, U.S. foreign direct investment, or U.S. electronic commerce.”
Here is what the report states, in summary fashion, about SOEs:
“State-owned enterprises (e.g., actions by SOEs and by governments with respect to SOEs involved in the manufacture or production of non-agricultural goods or in the supply of services that constitute significant barriers to, or distortions of, U.S. exports of goods and services, U.S. investments, or U.S. electronic commerce, which may negatively affect U.S. firms and workers. These actions include subsidies and non-commercial advantages provided to and from SOEs and practices with respect to SOEs that discriminate against U.S. goods or services, or actions by SOEs that are inconsistent with commercial considerations in the purchase and sale of goods and services)”
The NTE is then organized by country and several country profile mention SOEs including the following.
- State Owned Enterprises (SOEs) comprise about two-thirds of the Algerian economy by market value, and their procurements amount to 20 percent of gross domestic product. The national oil and gas company, Sonatrach, is the most prominent SOE, but SOEs are present in all sectors of the economy. SOEs leverage their position in the market to gain advantage over privately owned competitors. For example, state-owned telecommunications provider Algérie Télécom holds a monopoly over all undersea data cable traffic in and out of Algeria, offering services at a considerable advantage over private companies operating in the telecommunications sector. SOEs also have monopolies on activities such as the supply of electricity and water and the purchase and import of cereals and pulses. Several SOEs have weak balance sheets and require regular government financial assistance, partly due to activities such as selling products and services at below cost-recovery levels.
- In an effort to control key sectors of the economy, the Bolivian Government has made state-owned enterprises (SOEs) a major feature of the Bolivian economy. The government has obtained or maintained majority ownership in a number of companies in a long list of sectors including hydrocarbons, electricity, mining, and telecommunications. Bolivia has also created dozens of new public companies in “strategic” sectors such as food production, industrialization of natural resources, air travel, banking, and mining. U.S. stakeholders have expressed concern that these SOEs engage in unfair subsidized competition, constituting a significant barrier to investment. The Bolivian Government owns the second-largest bank in Bolivia, Banco Union, which competes with U.S. providers of banking services. Other SOEs include: the Sugar Cane Company of San Buena Aventura; Bolivia’s Industrialization Company of Gas and Oil; computer technology company QUIPUS; dairy processing company Lácteosbol; recycled paper company PAPELBOL; Brazil nut export company Empresa Boliviana de Alimentos; Bolivian national airline Boliviana de Aviación, the main operator in Bolivia; oil and gas company Yacimientos Petroliferos Fiscales Bolivianos; electricity company Empresa Nacional de Electricidad; and lithium company Yacimientos de Litio Bolivianos. Large SOEs such as these can acquire credit from the Central Bank at very low interest rates and on more convenient terms than non-SOEs, resulting in an unfair financial subsidy. The largest five SOEs alone owe the Central Bank $5.3 billion, more than double Bolivia’s international reserves. In many cases, government entities are directed by the government to do business with SOEs. The Bolivian Government grants ownership rights and controls the exploitation, exploration, and industrialization of natural resources through joint ventures between government entities or state-owned companies and public companies, communities, and private companies. No concessions or contracts may transfer ownership of hydrocarbon deposits to private or other interests.
- Although the Government of Ethiopia has launched processes to fully or partially privatize some SOEs, most notably under the Homegrown Economic Reform Plan, SOEs continue to dominate major sectors of the economy. These include the telecommunications, power, banking, insurance, air transport, certain agricultural processing, industrial parks, and shipping industries. Many SOEs maintain a monopoly over their respective sectors, which allows the Government of Ethiopia to dictate prevailing rates for many goods and services. U.S. investors complain of the lack of a level playing field when it comes to SOEs. In 2019, the Government of Ethiopia passed a law that prohibits certain SOEs from accessing new loans and instructs them to focus on completing outstanding projects. SOEs, however, have considerable advantages over private firms, such as expedited customs clearance processing, priority access to financing and foreign currency from the Commercial Bank of Ethiopia, preferences in government tenders and land acquisition, and marketing assistance. In December 2021, the Government of Ethiopia established Ethiopian Investment Holdings, a sovereign wealth fund, to prepare over 40 SOEs for full or partial privatization. The Government of Ethiopia has offered to sell eight state-owned sugar enterprises and a 45 percent stake in Ethio Telecom to foreign bidders. Thus far, Ethiopia has failed to attract interest in the Ethio Telecom stake, closing auctions with no successful bidders in 2021, 2022, or 2023. Transport and logistics are predominantly conducted by SOEs in Ethiopia, and monopolistic market conditions in multimodal transport operations and inadequate infrastructure inhibit private sector logistics companies. Consequently, logistics costs comprise approximately 22 percent to 27 percent of final costs for many products and shipping and freight costs are approximately 60 percent higher than in neighboring countries. Under the framework of a comprehensive logistics strategy, the Government of Ethiopia has slated the logistics sector for liberalization, and Ethiopian Railways officials report the border crossing process between Ethiopia and Djibouti by train has been streamlined. On October 13, 2024, the Minister of Transport and Logistics proposed a policy allowing foreign investors to own 100 percent of logistics companies, an increase from the previous cap of 49 percent. The policy must be approved by the Council of Ministers.
- The Kenyan Government wholly owns the National Oil Corporation and the Kenya Pipeline Corporation, which limits competition in this sector. Other state-owned enterprises (SOEs), including Kenya Electricity Generating Company, Kenya Electricity Transmission Company, Kenya Power, and the Geothermal Development Company, dominate the electricity generation, transmission, and distribution segments of the energy sector. Kenya Power’s internal procurement rules require that 80 percent of supplies be sourced from Kenyan-registered companies to encourage foreign suppliers to register by establishing manufacturing facilities in the country. Certain SOEs have enjoyed preferential access to markets. Examples include Kenya Re, which enjoys a guaranteed re-insurance market share; Kenya Seed Company, which has fewer marketing barriers than its U.S. competitors; and the National Oil Corporation, which benefits from retail market outlets developed with government funds. Some SOEs have also benefited from easier access to government loan guarantees, subsidies, and credit at favorable interest rates. The Kenyan Government announced in November 2023 that it would privatize several SOEs. However, the Kenyan High Court halted the privatization of 11 SOEs in September 2024, declaring the Privatization Act unconstitutional due to lack of public participation during its enactment.
- Russia’s numerous SOEs play a prominent role across much of the Russian economy. The Russian Academy of National Economy and Public Administration (RANEPA) estimated in May 2023 that the state’s share in the economy had grown from 47.3 percent in 2016 to 56.2 percent in 2021. While private enterprises are theoretically allowed to compete with SOEs on the same terms and conditions, in practice, the competitive playing field is distorted in favor of SOEs. These advantages result from SOEs’ lack of transparency and lack of independence. The presence of senior Russian Government officials on their boards of directors, government subsidies, preferential lending by state-owned banks, misalignment of managers’ incentives and company performance, inadequate control mechanisms on managers’ total remuneration or their use of assets transferred by the government to the SOEs, and minimal disclosure requirements further distort the competitive landscape. A specific variant of SOEs, state corporations, are completely owned by the government and operate under separate legislation and in a marketplace distorted in their favor. For example, state corporation holding structures and management arrangements (e.g., senior government officials as board members) create conditions for preferential treatment and leave significant scope for discretion and lobbying by company insiders, which disadvantage private enterprises. There are six state corporations: Rosatom, VEB, Fund for Communal Housing, Deposit Insurance Agency, Roskosmos, and Rostec. In order to spur growth and boost revenue through privatizations, the Russian Government in October 2024 decided to extend its existing three-year privatization program through 2027. From 2025 to 2027, Russia plans to fully privatize 20 federal state unitary enterprises and sell its stakes in 166 joint stock companies and seven limited liability companies. As of December 31, 2024, the Russian Government still owned 269 federal state unitary enterprises, as well as stakes of various sizes in 723 SOEs. As of December 31, 2024, the Russian Government still maintained a list of 55 SOEs with “national significance” that are either wholly or partially owned by Russia and whose privatization is permitted only with a special governmental decree, including Aeroflot, Rosneft, Rosneftegaz, Transneft, Russian Railways, and VTB. However, Russia has been slow in implementing the privatization plan. The treatment of foreign investors in privatizations conducted to date has been inconsistent, with foreign participation at times confined to minority stakes, which creates concerns about protection for minority shareholders and corporate governance.
