Privatisation: the next phase.
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]
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.
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).
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.
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.
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 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).
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.
Alesina, A., S. Ardagna, G. Nicoletti, and F. Schiantarelli (2005), "Regulation and Investment", Journal of the European Economic Association, Vol. 3, No. 4.
Antoncic, B. and R. Hisrich (2003), "Privatisation, Corporate Entrepreneurship and Performance: Testing a Normative Model", Journal of Developmental Entrepreneurship, December.
Baygan, G. (2003), "Venture Capital Policies in Sweden", OECD Science, Technology and Industry Working Paper, No. 2003/11.
Conway, P., D. de Rosa, G. Nicoletti, and F. Steiner (2006), "Regulation, Competition and Productivity Convergence", OECD Economics Department Working Paper, No. 509.
Ergungor, O.E. (2007), "On the Resolution of Financial Crises: The Swedish Experience", Federal Reserve Bank of Cleveland Policy Discussion Paper No. 21, June.
Hall, B. (2002), "The Financing of Research and Development", NBER Working Paper, No. 8773.
Hoj, J., M. Jimenez, M. Maher, G. Nicoletti, and M. Wise (2007), "Product Market Competition in the OECD Countries: Taking Stock and Moving Forward", OECD Economics Department Working Paper, No. 575.
Megginson, W. and J. Netter (2001), "From State to Market: A Survey of Empirical Studies on Privatisation", Journal of Economic Literature, Vol. 39, No. 2.
Megginson, W. (2005), The Financial Economics of Privatization, Oxford University Press, Oxford.
Megginson, W. ed. (2008), "The PB Interim Report June 2008", The Privatisation Barometer.
Moise, P. and E. Docteur (2007), "Pharmaceutical Pricing and Reimbursement Policies in Sweden", OECD Health Working Paper, No. 28.
Nicoletti, G., and S. Scarpetta (2003), "Regulation, Productivity and Growth: OECD Evidence", Economic Policy, April.
Nicoletti, G., and S. Scarpetta (2005), "Regulation and Economic Performance: Product Market Reforms and Productivity in the OECD", OECD Economics Department Working Paper, No. 240.
OECD (2003), Privatising State-Owned Enterprises: An Overview of Policies and Practices in OECD Countries, Paris.
OECD (2005a), "Structural Reform in the Rail Industry", Policy Roundtables, Paris.
OECD (2005b), OECD Economic Surveys: Sweden, Paris.
OECD (2006), Sweden--The Role of Competition Policy in Regulatory Reform, Paris.
OECD (2007), Sweden: Achieving Results for Sustained Growth, OECD Reviews of Regulatory Reform, Paris.
Sassi, F. and J. Hurst (2008), "The Prevention of Lifestyle-Related Chronic Diseases: An Economic Framework", OECD Health Working Paper, No. 32.
SOU (2008), Omreglering av apoteksmarknaden (Re-regulation of the retail market for pharmaceuticals), Swedish Government Official Reports, No. 2008:4.
Specialfastigheter (2007), Annual Report 2007, Stockholm.
Statistics Sweden (2008), Public Finances in Sweden 2008, Stockholm.
Swedish Competition Authority (2007), "Avveckla apoteksmonopolet med konsumentnyttan i fokus!" (Phase out the pharmaceutical retail monopoly with a consumer focus!), Stockholm.
Swedish Government (2006), State Ownership Policy 2005, Stockholm.
Swedish Government (2007), "Sale of Certain State-Owned Companies", Government Bill 2006/07:57, Stockholm.
Swedish Government (2008a), Annual Report on State Owned Companies 2007, Stockholm.
Swedish Government (2008b), "Samgaende mellan Posten AB och Post Danmark A/S" (Merger of Posten AB and Post Denmark A/S), Government Bill 2007/08:143, Stockholm.
Zahra, S., R. Ireland, I. Gutierrez, and M. Hitt (2000), "Privatisation and Entrepreneurial Transformation: Emerging Issues and a Future Research Agenda", The Academy of Management Review, Vol. 25, No. 3.
(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 #.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Chapter 5|
|Publication:||OECD Economic Surveys - Sweden|
|Date:||Dec 1, 2008|
|Previous Article:||Education and youth employment.|