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Privatisation: the next phase.

For many years, public ownership has been relatively widespread in Sweden--even in sectors where, typically, private companies operate on market conditions. Recently, privatisation has become a policy priority. Empirical evidence suggests that privatisation leads to improved firm performance and higher productivity growth. However, the benefits are contingent on enhancing the degree of competition--privatisation in itself is not enough. This chapter reviews these links and considers what steps to take next. Recent financial market turmoil may require some deals to be postponed, but that aside, privatisation should continue. After completing the current first wave of sales, the way to proceed would be a combination of further privatisation and market liberalisation together with consideration of other methods for providing government support where a market failure or social objective remains.

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The Swedish State owns 52 companies (39 wholly and 13 partly), employing some 180 000 staff. The portfolio of state-owned enterprises (SOEs) is estimated to be worth around one-quarter of the market capitalisation of the Stockholm stock exchange. Also, state ownership is spread broadly across the economy. Accordingly, Sweden has a higher-than-average proportion of sectors where the State has an equity stake in at least one firm (Figure 5.1). Local governments also have extensive ownership of enterprises. (1) Previous OECD Economic Surveys, successive issues of Going for Growth and the 2007 OECD Review of Regulatory Reform--Sweden have all called for reduced public sector involvement in competitive markets.

[FIGURE 5.1 OMITTED]

The government announced in December 2006 that it would undertake the sale of six wholly or partly owned SOEs as part of a larger divestment programme. The programme is estimated to deliver proceeds of around SEK 50 billion (5.3 billion [pounds sterling]) per year between 2007 and 2011, although this estimate is uncertain and depends on market conditions. Priorities for privatisation in the first round were: shareholdings in the financial sector (Nordea, the region's largest bank; OMX, owner of several Nordic and Baltic stock exchanges; and SBAB, a mortgage lender); TeliaSonera, a major telecommunications operator in the Nordic region; Vasakronan, a commercial real estate company; and V&S Group (the producer of Absolut Vodka). In 2007, approval was granted to divest all or part of Arbetslivsresurs, a company providing employee rehabilitation services. The government also has the authority to sell Imego, a research firm focusing on microelectronics (Swedish Government, 2008a).

In May 2007, the State sold 8% of the shares in TeliaSonera bringing its ownership down from 45.3% to 37.3% of the total shares in the company. In February 2008, it sold its 6.6% interest in OMX to Borse Dubai, who then sold the shares to NASDAQ, thereby creating the NASDAQ OMX Group. In March 2008, the State's 100% interest in V&S Group was sold to Pernod Ricard S.A. In April 2008, plans were announced for a merger between Posten and Post Danmark. The Swedish state will hold 49.8% of the voting rights in the new venture with the remaining shares held by the Danish state, a private company and the employees of both Posten and Post Danmark. (2) In July 2008, the government sold Vasakronan to AP Fastigheter. (3) In 2008, Sweden has thereby become one of the main sources of privatisation activity in Europe (Figure 5.2) in a context, however, where turmoil in international financial markets has damped the momentum of such operations (Megginson, 2008).

[FIGURE 5.2 OMITTED]

Why privatise?

The basic case for privatisation is to promote productivity and innovation. Government ownership makes it difficult to define the goals of the firm since governments often have objectives other than wealth maximisation. SOE managers do not face the same incentives to maximise profits or minimise costs since they do not reap the benefits of such actions. Even when the SOE is given a clear profit-maximising objective, it is unlikely to face the same market discipline as a private firm, since the government will typically be reluctant to let the SOE fail. A strong governance framework for SOEs may not be sufficient in the absence of a credible shut-down threat (Megginson, 2005). Publicly-owned enterprises may face problems with rent-seeking and political influence. Privatisation may lead to increased entrepreneurial activity and product or service innovation. To the extent that government ownership limits firms managers' ability to implement strategic change, privatisation may lead to more planning and development of market and industry analysis; greater discretion to refine firm goals and structures; and greater incentives to undertake new activities, develop new products or adopt new technologies to enhance shareholder value (Antoncic and Hisrich, 2003; Zahra et al., 2000).

The risk of regulatory failure in network industries is reduced when direct control is replaced by arms' length regulation. However, particularly in network industries, productivity gains following privatisation rely on the creation of sufficient market pressures in the potentially competitive segments of the industry, as well as regulation of access to the non-competitive segments. In general, privatisation has the greatest positive impact when the role for government in minimising a market failure is smallest (Megginson and Netter, 2001; Nicoletti and Scarpetta, 2003).

There is some debate about whether privatisation is necessary to achieve maximum efficiency gains, or whether introducing competition and deregulation are sufficient (Box 5.1). Some studies have identified a positive impact on firm performance from improved incentive arrangements and compensation for both managers and employees, while others find that such incentives are ineffective because the government is unable to implement them (Megginson and Netter, 2001). Government involvement may deter potential competitors from entering, as they may judge that regulations favour publicly-owned incumbents. Privatisation, by contrast, shows commitment to a level playing field.

In practice, the main motivations underpinning privatisation in OECD countries have been: improving the efficiency of publicly-owned enterprises and general market liberalisation; alleviating the restriction on expansion that may stem from government ownership (budget processes may constrain capital injections and SOEs may therefore resort more to debt financing); technological changes (e.g. in telecommunications and electricity generation) that reduce or eliminate existing monopoly power; development of domestic capital markets (by increasing share ownership and deepening domestic equity markets through public offerings); a change in political or ideological views of the role of government; and fiscal pressures and the use of privatisation proceeds to reduce debt or fund budget deficits (OECD, 2003). The Swedish privatisation programme has been driven primarily by a desire to improve efficiency and remove restrictions on expansion (Swedish Government, 2007) and to reduce the potential conflict between the government's roles as owner and regulator in some markets. The impact of technological change on the ability to maintain a monopoly is likely to be an increasing issue going forward.

Fiscal objectives should not be a motivation for privatisation in Sweden. Using privatisation proceeds to reduce net debt leaves the government's fiscal position broadly unchanged, apart from the possibility of higher tax revenues or lower subsidy costs due to improvement in corporate efficiency and performance of the former SOE. Using privatisation proceeds to finance increased spending is likely to worsen the fiscal position. Furthermore, the fact that many of the Swedish SOEs earn returns above the government's cost of borrowing is not an argument for retaining them, since this excess return is compensation for higher risk associated with the returns on equity. Despite the current strong fiscal position (Chapter 2), Swedish gross government debt is still more than 40% of GDP and asset sale proceeds should be used to reduce this debt. If there was a desire to hold equity as a financial investment strategy, it would be important to clearly link this to the fiscal policy framework. The focus of analysis on SOEs should then be whether the current portfolio of equities represents an appropriate balance of risk and return and whether the governance framework is appropriate if the investment is purely financially motivated.

How to proceed with the privatisation programme

The government has made strenuous efforts over a number of years to provide a sound governance structure for SOE activities based on the corporate regulation framework applying to private sector companies (Box 5.2). This framework increases the transparency and accountability of SOEs, so reduces the likelihood of significant inefficiency relative to competing private firms. The argument for privatisation therefore relies more on those factors which affect SOEs performance despite the strong governance framework--the fact that the government is unlikely to let them fail and that their flexibility is constrained by objectives and rules that are not applied to private firms.
Box 5.1. Evidence on the benefits of privatisation

Many studies have attempted to test whether the theoretical
predictions about the benefits of privatisation are realised in
practice. There is overwhelming (although not unanimous) support
for the view that privatisation significantly increases
profitability, real output and efficiency, and reduces leverage in
privatised companies (implying that their initial capital structure
was sub-optimal). However, it is more difficult to discern from
empirical studies whether all the benefits arise from privatisation
or whether they are mainly due to the market liberalisation and
deregulation that often accompanies it.

The increase in efficiency is particularly notable when the firm
operates in a competitive environment. Profitability increases more
and productivity less in regulated or less competitive sectors.
Some studies report that the benefits of privatisation flowed to
the shareholders in the form of increased profits but that
consumers did not share in these gains due to insufficient
competition. Sectors where privatised companies were required to
make up significant investments in infrastructure saw price rises
rather than falls following privatisation (OECD, 2003).

Empirical evidence supports two distinct effects of
privatisation--an anticipation effect, where the firm's performance
improves ahead of privatisation (possibly due to reforms aimed at
making the firm more attractive for sale) and a follow-through
effect, whereby firm performance continues to improve after the
sale. The gains from privatisation are often attributed to better
incentives and, to a lesser extent, lower employment costs. There
is evidence that privatisation can affect competitors' pricing and
market value. Privatisation is also associated with a reduction in
leverage of the privatised firm (Megginson and Netter, 2001),
consistent with the idea that government ownership might restrict
access to equity capital and force greater reliance on borrowing.

Many studies report that privatisation is associated with reduced
employment in the privatised firm, possibly because firms slated
for privatisation are overstaffed. While employment may fall, some
studies report increased salaries and better terms for the
remaining employees, accompanied by decreased job security and
longer working hours (OECD, 2003; Megginson and Netter, 2001).
However, these studies likely do not capture the full dynamic
effects of increased competition on growth and employment in the
longer term.

A range of studies have taken a more macroeconomic approach looking
at the link between competition and economy-wide performance. Lower
barriers to trade and competition in less regulated countries seems
to have increased the level and rate of growth of productivity by
stimulating business investment and promoting innovation and
technological catch-up. Importantly, countries with less
restrictive regulatory environments tend to invest more in ICT
capital, a significant contributor to productivity growth in recent
decades (Nicoletti and Scarpetta, 2005; Conway et al., 2005).
Privatisation has been found to be positively related to
productivity growth but, as with firm and industry-level studies,
the gains depend on adequate promotion of competition in the
markets in which the newly-privatised firms operate (Nicoletti and
Scarpetta, 2003). Both deregulation and privatisation are found to
lead to greater aggregate investment (Alesina et al., 2005). *

* From a theoretical perspective, it is unclear whether
Privatisation should lead to higher or lower investment. On the one
hand, agency problems and political mandates affecting
public-sector managers might suggest that publicly-owned companies
may over-accumulate capital. Privatisation might thus result in
lower investment. On the other hand, increased competition might
reduce mark-ups and the penalty associated with expansion in a
non-competitive market. This suggests that privatisation should
increase investment.

Box 5.2. Corporate governance of state-owned enterprises in Sweden

The Swedish government is an active manager of SOEs, with the
overarching objective being the creation of value and, in some
cases, to contribute to special societal interests. The Minister
for Enterprise and Energy has been delegated responsibility under
the Constitution for matters relating to the operation of SOEs,
except where authorisation for sale has been approved by
Parliament, in which case the Minister for Local Government and
Financial Markets is responsible for the sales process. The
Ministry of Enterprise, Energy and Communications is mainly
responsible for administering the government's ownership policy,
although other ministries are responsible in relation to companies
particularly relevant to their portfolio interests (for example,
issues related to Apoteket's pharmacies are handled by the Ministry
of Health and Social Affairs).

The government's ownership policy for SOEs requires that they
comply with the Swedish Code for Corporate Governance, which
applies to private companies, unless there are sound reasons for
departure in which case these must be reported (Swedish Government,
2006). SOEs are subject to the same corporate law as private
companies and in some circumstances to specific legislation
relating to the activities of the individual enterprise (e.g. the
Postal Services Act in relation to Posten). Members of the Riksdag
have the right to attend annual general meetings of companies where
the state owns more than 50% of the shares and which have more than
50 employees. Large SOEs are expected to hold a public event
related to the annual general meeting to allow the general public
to ask questions of the board. Board nominations are undertaken by
the Ministry of Enterprise, Energy and Communications based on
competence, with a target of at least 40% participation by each
gender. Boards are expected to have between six and eight members.
Boards are required to establish strategies for handling
environmental considerations, social issues, human rights, gender
equality, diversity and ethics. In contrast to the Code for
Corporate Governance applying to private companies, an SOE's chief
executive officer is generally not a member of the board of the
SOEs. Remuneration of staff can include performance incentives
(except for CEOs) which should not exceed four months' salary.
Capital contributions to SOEs are governed by EU rules on state aid
and additional legislation has been adopted to ensure transparent
reporting of such grants. Guidelines for external reporting
complement general rules for company reporting applying to private
companies, requiring SOEs to report on environmental issues,
financial and operational risks, equal opportunity policies,
dividend policy and a description of the work of the board.

Financial targets vary from company to company according to their
purpose. In general, the higher the risk in the company, the higher
the minimum profitability target; the higher the operating risk,
the higher the proportion of equity required; and the lower the
growth of the company, the higher the dividend share. Companies are
classified as those operating under market conditions and those
operating with special societal interests. Companies operating
under market conditions should be subject to the same financial
constraints as other participants in the market. The state sets
targets to ensure that capital structure and return on capital
objectives do not unduly affect competition. Companies operating
with special societal interests can face goal conflict between
optimising financial targets and promoting their social objectives.
Financial targets are therefore set to take social interests into
account to facilitate target achievement and ensure that the
company is operating as efficiently as possible within its
constraints. Part of the dividends from SOEs has been earmarked for
used as capital contributions to other SOEs (Swedish Government,
2008b).


One key element of the corporate governance framework for SOEs is the distinct treatment of companies deemed to be operating under market conditions versus those with specific social objectives. However, even some of the companies defined as operating under market conditions are not completely open to competition or receive some grant funding (Table 5.1). The first phase of the government's privatisation programme involved selling those large companies that clearly operate in competitive markets. Anticipating the completion of the sales of the companies which the Riksdag has already approved, the next phase should proceed in two steps.

First, the remaining firms that operate in competitive markets, where minimal changes in regulation or operation would be required to move the company into private hands, should be considered for privatisation. (4) Second, consideration should be given to the regulatory arrangements and scope for increased competition in relation to companies that are not currently operating in a competitive market. Improving competition in these markets could boost productivity and help prepare for future privatisation if that is deemed appropriate.

In the case of companies whose main aim is to promote a particular social objective, alternative ways to deliver these objectives could be considered, with the aim of increasing competition and enhancing consumer welfare. These include competitive tendering of grant funding; partial privatisation, possibly through divesture or contracting out of parts of the SOE where alternative providers already exist; and liberalisation of monopoly restrictions.

The following sections selectively review some of the industries in which government currently has substantial presence.

Transport

Several of the companies owned by the Swedish State in the transport sector are in rail. The structure of railway markets in OECD countries varies widely because of the different roles played by rail in different countries (domestic, international, passenger, freight, etc.) and because of the degree of competition from other modes of transport (cars, trucks, buses, air). In general, OECD country experience points to the need for unbundling vertically-integrated railway companies and the importance of non-discriminatory access to rolling stock for the development of competition. Contracting out railway passenger services could increase competition but this must be done in a way that does not discriminate against new entrants (Hoj et al., 2007).

The introduction of competition in the rail sector in Sweden has had positive effects in terms of innovation, streamlining of activities and lower costs. The process started with vertical separation, with the railway infrastructure being retained by the State through the National Rail Administration and operations vested with SJ for passenger traffic and Green Cargo for freight. In passenger traffic, the government directly contracts for the provision of services on routes that are not considered profitable. However, for other routes SJ holds a monopoly position. In fact, SJ itself decides which routes are profitable, and therefore which ones it should have a monopoly over, and is not under any obligations regarding service standards. SJ's monopoly position should be phased out (OECD, 2005a). At the very least, or in the meantime, an independent authority should decide on the routes that SJ should have a monopoly over.

The rail freight market has been exposed to more competition than the passenger market, but Green Cargo still retains a dominant position in the market. If market dominance is deemed too strong to consider privatisation, separating TGOJ Trafik, a subsidiary of Green Cargo, from its parent company would foster additional competition (OECD, 2005a).

Financial services

The State owns a number of finance companies that operate in specific segments of the market. Authority has been provided to sell Nordea and SBAB, the mortgage originator. Nordea, in its current form, emerged from Nordbanken, which was nationalised during the financial crisis of the early 1990s. As the current financial crisis has evolved, the Swedish handling of the previous crisis has gained renown. This included separating the nationalised financial institutions' "good" assets from their "bad" assets and establishing adequately capitalised asset management companies to rejuvenate or liquidate the bad assets (Ergungor, 2007). This experience suggests that, as the current financial crisis passes, privatisation will in due course re-emerge as an important policy issue in many countries.

The Swedish Ships Mortgage Bank, which competes directly with domestic banks and international financiers, is a subsequent candidate for corporatisation and privatisation. Consideration could be given to increasing the flexibility the company has in determining loan conditions in order to better tailor products to the market, (5) although this may increase the risk ultimately borne by the State if the company remains in government hands.

Properties and building maintenance

The Swedish State owns a number of companies that effectively perform the same function--to own and lease buildings. (6) The rationale for government ownership appears to be that these buildings are special-purpose buildings and are used to provide public services: university buildings, prisons, police facilities, state special schools, etc. To the extent that buildings are fit for purpose, the tenants have a clear interest in renting the premises for the long term. Hence the risk that properties will be vacant is low. On the other hand, should a tenant move out it might be difficult to find another one. Specialfastigheter, an SOE which owns and manages special purpose buildings, itself acknowledges the increase in competition in the market for specialist buildings and intends to respond by strengthening its expertise in project management for refurbishment, extension and new building. The trend among tenants to concentrate their activities on larger units also means that the risk of vacancies in properties is increasing, leading to a greater focus on the capacity to improve and dispose of properties (Specialfastigheter, 2007).

An alternative model is to have private sector interests take ownership of the buildings and/or the companies that own them. This would have little impact on the tenant, as they would continue to rent the property from an external provider. The risk with selling the properties is that the private owner may charge rents higher than the market price since they know that it would be very difficult or costly for the (public sector) tenant to find replacement accommodation. This suggests the need for strong negotiation and contract management skills on the part of the renters.

Research and development and venture capital

Research and development is important for innovation and economic growth and government support is justified on the grounds that there is likely to be under-investment due to positive spill-overs, non-appropriability and uncertainty. Even if the returns to R&D can be captured through intellectual property protection, subsidies or tax incentives, it may be difficult or costly for firms to access external capital due to asymmetric information. This can be addressed through government funding for start-ups or the development of venture capital markets (Hall, 2002).

In addition to providing substantial R&D funding directly through universities, the Swedish government also owns a number of enterprises that either offer capital and assistance to other R&D companies or directly conduct research. The government already has the authority to sell Imego and consideration could be given to whether the research efforts of SP Sveriges Tekniska Forskningsinstitut could be privately provided.

In the area of venture capital, previous OECD reports have suggested consolidating and simplifying public equity funding and targeting it more towards pump-priming of private funding in start-ups (Baygan, 2003). Other government initiatives to promote access to finance on the part of small businesses, such as deferral of capital gains tax on closely-held companies and the abolition of the wealth tax should, over time, reduce the need for SOE involvement in financing small businesses.

Retail

Pharmaceuticals retailing

The Swedish pharmacy monopoly, Apoteket, is unique among OECD countries and was designed to safeguard the future supply of pharmaceuticals, ensure safe and efficient distribution and keep prices down. (7) Pharmaceutical prices paid by the government to manufacturers are on average among the highest in Europe, whereas the average consumer price faced by the public is lower than the European average. Retail and wholesale margins are low partly because distribution costs in Sweden are relatively low, despite lack of competition at the retail level.

Deregulation in the market for prescription drugs alone would not necessarily result in cost savings to retail purchasers, since reimbursement prices paid by the government are set in law. Any prescription-drug price discounts achieved from manufacturers or wholesalers through competition would be captured by retailers. Deregulation could be combined with making the reimbursement price a maximum rather than a fixed price. Also, there are a relatively small number of pharmacies in proportion to the population and hours of operation are limited, so consumer welfare would be increased by widening opening hours and introducing competitive tendering for subsidies to sales agents in remote or regional areas. Further consumer savings and improved access in remote areas would be achieved by allowing retail competition for non-prescription drugs, for which safety concerns are minimal (Moise and Docteur, 2007; OECD, 2005b). The Swedish Competition Authority has recommended ending Apoteket's monopoly combined with other measures such as prohibiting the ownership of pharmacies by manufacturers of medicines and making Apoteket's computerised system for prescription transfers available to all pharmacies (Swedish Competition Authority, 2007).

A government report in early 2008 recommended a number of the changes outlined above, including limiting Apoteket's market share by selling some pharmacies, separating the database and information infrastructure from Apoteket and retaining these in state control but with a competitively-neutral access regime, and allowing for reductions in prices of pharmaceuticals that do not have patent cover and face generic competition (SOU, 2008). A bill has been introduced to the Riksdag covering the separation of information systems and Apoteket was restructured in early 2008 pending a future process of divesting pharmacies. The Swedish government has also introduced measures in the 2009 Budget to increase choice in health care provision. One of the main goals of this measure is to promote private entrepreneurship within the health-care sector with the aim of raising productivity within the sector in the long run.

Alcohol retailing

In alcohol retailing, technological change and pressures from EU integration are making the existing monopoly arrangement harder to maintain. The SOE Systembolaget has the legal monopoly to sell alcohol directly to consumers, the aim of the monopoly being to reduce harm caused by alcohol consumption and to limit total consumption of alcohol. Access to alcohol is limited by regulating the establishment of outlets and opening hours, and through selling rules. However, Systembolaget's share of total consumption, measured in pure alcohol, was only 48% in 2005. The other main sources of supply were imports by travellers (22%), smuggling and home-produced alcohol (13%), and restaurant sales (10%) (OECD, 2006). There are anecdotal reports of increasing efforts to bypass the state monopoly. (8)

Consumer welfare would be improved by liberalising opening hours and licensing of other selected vendors, in anticipation of full privatisation. Health policy objectives might be better dealt with through education on the harmful effects of excessive alcohol consumption, particularly for youth since their tastes are still being formed, or increasing excise taxes on alcohol (Sassi and Hurst, 2008).

Gambling

Gambling is another case where technological change and globalisation may drive alternatives to the current ownership arrangement. The market regulation of gambling and lotteries does not prescribe a strict monopoly, but gives exclusive rights to several groups, including the State and the horse-racing community. The largest market actor is Svenska Spel, an SOE controlling 56% of commercial gambling in Sweden. The gambling market is growing rapidly, not least through internet-based betting, roulette and poker offered by foreign suppliers. Svenska Spel has responded to increased competition from foreign gambling enterprises, and in 2005 the government authorised it to organise poker games on the Internet. Moreover, the monopoly may not be compatible with EU law, which precludes legislation preventing competition from foreign actors (OECD, 2006).

Conclusions

Focusing state ownership on segments of the economy where it has a clear rationale will likely lead to better provision of public services and promote efficiency. The ongoing sale of large companies is an important step and should continue--although financial market turmoil may require some transactions to be postponed so as to secure the right price. Looking ahead, further privatisations should be considered alongside other measures to increase competition (Box 5.3).
Box 5.3. Summary of privatisation recommendations

* Firms that already operate in competitive markets with no
monopoly power or grant funding should be privatised. There are
examples in the transport, property, finance and forestry sectors.

* Consideration should be given to reducing monopoly power, such as
in the rail and retail sectors, along with appropriate regulatory
changes to safeguard consumer welfare. Once markets are opened to
competition, partial or complete privatisation of today's
state-owned companies should be considered.

* With regard to firms that are entrusted with particular societal
interests, consideration should be given to whether there are forms
of policy intervention other than public ownership that might
achieve the same goals. For example, the need for government
ownership of venture capital funds and R&D companies would seem to
be limited.


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Notes

(1.) Data from Statistics Sweden suggest that the overall number of publicly-owned companies exceeds 2 100, of which some 500 are owned by the central government, some 1 500 by municipalities and about 100 by county councils. In relation to the central government, the discrepancy between these figures and the 52 companies mentioned in the text mainly relates to the fact that the central government reports company groupings rather than individual legal entities. About half of the municipal public companies operate in the real estate, renting and business activities sector, likely reflecting the structure of the rental housing market in Sweden (reviewed in the 2007 Survey). 60% of county-council-owned companies operate in the transport, storage and communications sector (Statistics Sweden, 2008).

(2.) The shareholders' agreement is to provide for mechanisms to broaden the shareholder base by seeking a future listing on OMX stock exchange (Swedish Government, 2008b).

(3.) As part of the deal, Sweden's National Property Board and the SOE Specialfastigheter AB acquired some properties deemed to be of national interest from Vasakronan.

(4.) The companies which are classified as operating under market conditions and have no grant funding, and therefore might be considered as the next candidates for privatisation, include Green Cargo, the Swedish Space Corporation, SweRoad, Svenska Exportkredit, Venantius, Swedish Ships Mortgage Bank, Kasernen Fastighets, A/O Dom Shvetsii, Lernia, SwedSurvey and Sveaskog (Table 5.1). The government has stated that it does not intend to sell LKAB (mining) and Vattenfall (electricity generation) even though they operate in competitive markets. In the case of LKAB, this is due to the need to move a substantial part of the mining town of Kiruna in order to expand an iron ore mine. Vattenfall will not be privatised because of concerns of market dominance in the electricity industry.

(5.) The Bank's operations are governed by the Swedish Ships' Mortgage Bank Act. The Act specifies that the Bank can only finance Swedish shipping companies or foreign shipping companies with a significant Swedish interest; the loan term must be no more than 15 years and the loan must be paid off in full when the ship reaches the age of 20 years (unless there are special circumstances); and there are limits on the proportion of the ship's value that can be lent.

(6.) In May 2008, Vasallen announced that its task of developing and divesting facilities and buildings belonging to Forsvarsmakten (the defence force) is reaching its end within the next two years. Hence, the Vasallen board is now is now investigating the possibility of winding up the business.

(7.) A core element of Swedish pharmaceuticals policy is ensuring that prices for drugs are the same in all parts of the country. Apoteket also sells non-prescription drugs over the Internet and by telephone. Prices for subsidised pharmaceutical products are set by the Pharmaceutical Benefits Board. Most but not all prescription drugs are subsidised. Prices for other drugs are decided by Apoteket.

(8.) For example, "Entrepreneurs crack Swedish 'System' in effort to allow free flow of alcohol", Financial Times, 4 August 2008.
Table 5.1. Sweden central government-owned enterprises

Transport

  SAS AB                                Airline

  Posten AB                             National postal service

  SJ AB                                 Rail

  Green Cargo AB                        Rail operator specialising in
                                        environmental friendly modes

  Botniabanan                           Commissioned by the Swedish
                                        government to build the
                                        Bothnia Line, a railway running
                                        from Nyland, north of Kramfors,
                                        via Ornskoldsvik, to Umea

  AB Svensk Bilprovning (1)             Motor vehicle inspection

  SVEDAB                                Owns 50% of The Oresundsbro
                                        Konsortiet which operates the
                                        fixed link between Malmo and
                                        Copenhagen and the Swedish land
                                        based approaches to the Oresund
                                        bridge

  SwedCarrier AB                        Rail

  Rymdbolaget                           Designs, launches, tests and
  (Swedish Space Corporation)           operates space and aerospace
                                        systems

  A-Banan projekt AB                    Stockholm-Arlanda rail link

  SweRoad AB                            Provides consultancy services
                                        within road and transport
                                        sector to clients outside
                                        Sweden

  Zenit Shipping AB                     Liquidating formerly
                                        nationalised ships

Finance

  Nordea Bank AS#                       Bank#

  SBAB#                                 Mortgage originator#

  Svensk Exportkredit AB                Export and infrastructure
                                        finance

  Venantius AB                          Manages loans to tenant-owner
                                        associations and property
                                        companies

  Svenska Skeppshypoteks Kassan         Provides loans for shipping
  (Swedish Ships Mortgage Bank)         companies to purchase ships

  Swedfund International AB             Offers risk capital in the form
                                        of share capital, loans,
                                        guarantees and part-financing
                                        of leasing agreements for
                                        investment in Africa, Asia,
                                        Latin America and Eastern
                                        Europe (non-EU members)

  Bostadsgaranti AB                     Provides warranties and
                                        guarantees for building
                                        construction

  Forvaltingsaktiebolaget Stattum       Holding company

Property

  Akademiska Hus AB                     Higher education facilities

  Specialfastigheter Sverige AB         Special purpose buildings

  Vasallen AB                           Converts former defence force
                                        properties into commercial
                                        developments

  Kasernen Fastighets AB                Accommodation for armed forces
                                        personnel

  A/O Dom Shvetsii                      Owns property in St Petersburg
                                        currently rented by the Swedish
                                        Consulate General and the
                                        Swedish Trade Council

  Statens Bostadsomvandling AB          Regenerating vacant municipal
                                        housing stock

Research and development

  ALMI Foretagspartner                  Financing and business
                                        development

  SP Sveriges Tekniska                  Research and consulting in
  Forskningsinstitut AB                 technical evaluation and
                                        metrology

  IRECO Holding AB                      Support for industrial research
                                        institutes

  Imego AB#                             Nano and micro technology#

  Innovationsbron AB                    Helps identify research and
                                        development related ideas with
                                        commercial potential and
                                        contribute to commercialization

Business services

  Lernia AB                             Temporary employment, training,
                                        rehabilitation services

  Arbetslivsresurs AR AB#               Employee rehabilitation#

  Swedesurvey AB                        National land management
                                        systems

  Svenska Miljostyrningsradet AB (2)    Encouraging sustainable
                                        development by supporting the
                                        environmental initiatives
                                        of business and the public
                                        sector

  Norrland Center AB                    Regional policy focus on
                                        Norrland region

Retail

  Apoteket AB                           Pharmaceuticals

  AB Svenska Spel                       Gaming

  Systembolaget AB                      Alcohol

Communications

  TeliaSonera AB#                       Fixed and mobile telephony,
                                        internet and data
                                        communications#

  Teracom AB#                           Radio and television

  SOS Alarm Sverige AB                  Emergency services call centre

Tourism

  VisitSweden AB                        Tourism promotion activities

  Gota kanalbolag AB                    Owner and operator of the Gota
                                        Canal

  Leisure

  Kungliga Operan AB                    Owner of the Royal Opera

  Kungliga Dramatiska Teatern AB        Owner of the Royal Dramatic
                                        Theatre

Other

  Vattenfall AB---Energy                Electricity and heat

  LKAB--Mining and manufacturing        Iron ore

  Samhall AB                            Employs people with
                                        disabilities in a range of
                                        roles

  Sveaskog AB--Forestry                 Forestry and timber
                                        manufacturing

  VoksenAsen AS                         Swedish/Norwegian cultural
                                        exchange

  SIS Miljomarkning                     Promotion of environmental
                                        labelling of products

                                        Listed/Market conditions/
                                        Special societal interests

Transport

  SAS AB                                Listed

  Posten AB                             Market conditions

  SJ AB                                 Market conditions

  Green Cargo AB                        Market conditions

  Botniabanan                           Special societal interests

  AB Svensk Bilprovning (1)             Special societal interests
  SVEDAB                                Special societal interests

  SwedCarrier AB                        Market conditions

  Rymdbolaget                           Market conditions
  (Swedish Space Corporation)

  A-Banan projekt AB                    Special societal interests

  SweRoad AB                            Market conditions

  Zenit Shipping AB                     Being wound up

Finance

  Nordea Bank AS#                       Listed#

  SBAB#                                 Market conditions#

  Svensk Exportkredit AB                Market conditions

  Venantius AB                          Market conditions

  Svenska Skeppshypoteks Kassan         Market conditions

  (Swedish Ships Mortgage Bank)

  Swedfund International AB             Special societal interests

  Bostadsgaranti AB                     Special societal interests

  Forvaltingsaktiebolaget Stattum       Market conditions

Property

  Akademiska Hus AB                     Market conditions

  Specialfastigheter Sverige AB         Market conditions

  Vasallen AB                           Market conditions

  Kasernen Fastighets AB                Market conditions

  A/O Dom Shvetsii                      Market conditions

  Statens Bostadsomvandling AB          Special societal interests

Research and development

  ALMI Foretagspartner                  Special societal interests

  SP Sveriges Tekniska                  Special societal interests
  Forskningsinstitut AB

  IRECO Holding AB                      Special societal interests

  Imego AB#                             Market conditions#

  Innovationsbron AB                    Special societal interests

Business services

  Lernia AB                             Market conditions

  Arbetslivsresurs AR AB#               Market conditions#

  Swedesurvey AB                        Market conditions

  Svenska Miljostyrningsradet AB (2)    Special societal interests

  Norrland Center AB                    Special societal interests

Retail

  Apoteket AB                           Special societal interests

  AB Svenska Spel                       Special societal interests

  Systembolaget AB                      Special societal interests

Communications

  TeliaSonera AB#                       Listed#

  Teracom AB#                           Market conditions

  SOS Alarm Sverige AB                  Special societal interests

Tourism

  VisitSweden AB                        Special societal interests

  Gota kanalbolag AB                    Special societal interests

  Leisure

  Kungliga Operan AB                    Special societal interests

  Kungliga Dramatiska Teatern AB        Special societal interests

Other

  Vattenfall AB---Energy                Market conditions

  LKAB--Mining and manufacturing        Market conditions

  Samhall AB                            Special societal interests

  Sveaskog AB--Forestry                 Market conditions

  VoksenAsen AS                         Special societal interests

  SIS Miljomarkning                     Special societal interests

                                                  Govt share
                                                      %

Transport

  SAS AB                                             21.4

  Posten AB                                           100

  SJ AB                                               100

  Green Cargo AB                                      100

  Botniabanan                                          91

  AB Svensk Bilprovning (1)                            52

  SVEDAB                                              100

  SwedCarrier AB                                      100

  Rymdbolaget                                         100

  (Swedish Space Corporation)

  A-Banan projekt AB                                  100

  SweRoad AB                                          100

  Zenit Shipping AB                                   100

Finance

  Nordea Bank AS#                                    19.9#

  SBAB#                                               100#

  Svensk Exportkredit AB                              100

  Venantius AB                                        100

  Svenska Skeppshypoteks Kassan                       100
  (Swedish Ships Mortgage Bank)

  Swedfund International AB                           100

  Bostadsgaranti AB                                    50

  Forvaltingsaktiebolaget Stattum                     100

Property

  Akademiska Hus AB                                   100

  Specialfastigheter Sverige AB                       100

  Vasallen AB                                         100

  Kasernen Fastighets AB                              100

  A/O Dom Shvetsii                                     36

  Statens Bostadsomvandling AB                        100

Research and development

  ALMI Foretagspartner                                100

  SP Sveriges Tekniska                                100
  Forskningsinstitut AB

  IRECO Holding AB                                    100

  Imego AB#                                           100#

  Innovationsbron AB                                83.70

Business services

  Lernia AB                                           100

  Arbetslivsresurs AR AB#                             100#

  Swedesurvey AB                                      100

  Svenska Miljostyrningsradet AB (2)                   85

  Norrland Center AB                                33.30

Retail

  Apoteket AB                                         100

  AB Svenska Spel                                     100

  Systembolaget AB                                    100

Communications

  TeliaSonera AB#                                    37.3#

  Teracom AB#                                         100

  SOS Alarm Sverige AB                                 50

Tourism

  VisitSweden AB                                       50

  Gota kanalbolag AB                                  100

  Leisure

  Kungliga Operan AB                                  100

  Kungliga Dramatiska Teatern AB                      100

Other

  Vattenfall AB---Energy                              100

  LKAB--Mining and manufacturing                      100

  Samhall AB                                          100

  Sveaskog AB--Forestry                               100

  VoksenAsen AS                                       100

  SIS Miljomarkning                                    10

                                             Competition/
                                            Grant financing

Transport

  SAS AB

  Posten AB                             Partial grant financing

  SJ AB                                 Partial competition

  Green Cargo AB

  Botniabanan

  AB Svensk Bilprovning (1)             Statutory monopoly

  SVEDAB

  SwedCarrier AB                        Partial competition

  Rymdbolaget
  (Swedish Space Corporation)

  A-Banan projekt AB

  SweRoad AB

  Zenit Shipping AB

Finance

  Nordea Bank AS#

  SBAB#

  Svensk Exportkredit AB

  Venantius AB

  Svenska Skeppshypoteks Kassan
  (Swedish Ships Mortgage Bank)

  Swedfund International AB

  Bostadsgaranti AB

  Forvaltingsaktiebolaget Stattum

Property

  Akademiska Hus AB                     Partial competition

  Specialfastigheter Sverige AB         Partial competition

  Vasallen AB

  Kasernen Fastighets AB

  A/O Dom Shvetsii

  Statens Bostadsomvandling AB

Research and development

  ALMI Foretagspartner                  Partial grant financing

  SP Sveriges Tekniska                  Partial grant financing
  Forskningsinstitut AB

  IRECO Holding AB                      Partial grant financing

  Imego AB#                             Partial grant financing#

  Innovationsbron AB

Business services

  Lernia AB

  Arbetslivsresurs AR AB#

  Swedesurvey AB

  Svenska Miljostyrningsradet AB (2)    Sole operator, partial
                                        grant financing
  Norrland Center AB

Retail

  Apoteket AB                           Statutory monopoly

  AB Svenska Spel                       Partial monopoly

  Systembolaget AB                      Statutory monopoly

Communications

  TeliaSonera AB#

  Teracom AB#                           Partial monopoly

  SOS Alarm Sverige AB                  Partial competition

Tourism

  VisitSweden AB                        Partial grant financing

  Gota kanalbolag AB                    Partial grant financing

  Leisure

  Kungliga Operan AB                    Partial grant financing

  Kungliga Dramatiska Teatern AB        Partial grant financing

Other

  Vattenfall AB---Energy

  LKAB--Mining and manufacturing

  Samhall AB                            Partial grant financing

  Sveaskog AB--Forestry

  VoksenAsen AS                         Sole operator, partial
                                        grant financing

  SIS Miljomarkning                     Partial grant financing

                                             Net turnover + other
                                           income, SEK million, 2007

Transport

  SAS AB                                            52 251

  Posten AB                                         30 132

  SJ AB                                              8 267

  Green Cargo AB                                     6 157

  Botniabanan                                        2 258

  AB Svensk Bilprovning (1)                          1 533

  SVEDAB                                               858
  SwedCarrier AB                                       696

  Rymdbolaget                                          561
  (Swedish Space Corporation)

  A-Banan projekt AB                                    62

  SweRoad AB                                            54

  Zenit Shipping AB

Finance

  Nordea Bank AS#                                  71 836#

  SBAB#                                             1 177#

  Svensk Exportkredit AB                               833

  Venantius AB                                         180

  Svenska Skeppshypoteks Kassan                        331
  (Swedish Ships Mortgage Bank)

  Swedfund International AB                            212

  Bostadsgaranti AB                                     33

  Forvaltingsaktiebolaget Stattum                        0

Property

  Akademiska Hus AB                                  4 786

  Specialfastigheter Sverige AB                      1 209

  Vasallen AB                                          220

  Kasernen Fastighets AB                                20

  A/O Dom Shvetsii                                      18

  Statens Bostadsomvandling AB                          13

Research and development

  ALMI Foretagspartner                                 796

  SP Sveriges Tekniska                                 769
  Forskningsinstitut AB

  IRECO Holding AB                                     345

  Imego AB#                                             56#

  Innovationsbron AB                                    50

Business services

  Lernia AB                                          2 280

  Arbetslivsresurs AR AB#                              197#

  Swedesurvey AB                                       109

  Svenska Miljostyrningsradet AB (2)                    12

  Norrland Center AB                                     5

Retail

  Apoteket AB                                       39 505

  AB Svenska Spel                                   21 716

  Systembolaget AB                                  20 581

Communications

  TeliaSonera AB#                                   96 965#

  Teracom AB#                                        3 312

  SOS Alarm Sverige AB                                 731

Tourism

  VisitSweden AB                                       155

  Gota kanalbolag AB                                    54

  Leisure

  Kungliga Operan AB                                   448

  Kungliga Dramatiska Teatern AB                       244

Other

  Vattenfall AB---Energy                           145 421

  LKAB--Mining and manufacturing                    16 584

  Samhall AB                                         7 432

  Sveaskog AB--Forestry                              7 373

  VoksenAsen AS                                         55

  SIS Miljomarkning                                     34

Note: Italics means already approved for sale.

(1.) Co-owned by the Swedish government, organisations of the
Swedish motor industry, motor associations and motor insurance
companies.

(2.) Owned jointly by the Swedish government, the Confederation of
Swedish Enterprises and the Swedish Association of Local
Authorities and Regions.

Source: Swedish government (2008a) and various company websites.

Note: Already approved for sale indicated with #.
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Article Details
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Title Annotation:Chapter 5
Publication:OECD Economic Surveys - Sweden
Geographic Code:4EUSW
Date:Dec 1, 2008
Words:7225
Previous Article:Education and youth employment.
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