Mixed ownership no guarantee of stronger performance

Six state-owned firms were named last week to take part in pilot reforms intended to boost state sector performance, partly by encouraging private investment. The experiment could have far-reaching ramifications but success is not assured. Private investors already hold minority stakes in many state firms but the performance of these firms has not diverged from that of their wholly state-owned cousins. (See Chart below.) In practice, minority owners have little say over how these firms are run. If mixed ownership is to become an effective means of revitalising state-owned industry, the government will need to allow outside investors to exercise more control.