According to a World Bank analysis, Romanian state-owned companies, especially those with majority capital, both those controlled by central and local governments, employ more people, pay higher wages, but are less productive. There is also evidence that the presence of state-owned enterprises can limit the market entry of private firms and affect the efficiency of resource allocation.

Romanian state-owned enterprises tend to perform worse than their counterparts in the private sector. They are less profitable and generate less income per employee than their private sector counterparts. In addition, it turned out that civil servants have significantly higher salary bonuses, which affects the financial results of companies.

The World Bank analyzed the profitability of Romania’s state-owned companies compared to private companies, as well as salary levels, productivity and productivity over the past 10 years. The novelty of this analysis is provided by the fact that the article evaluates the performance of Romanian state-owned enterprises with different degrees of ownership (minorities owned by the state with shares from 10 to 24.9 percent, minorities owned by shares from 25 to 49.9 percent). and the majority owner with shares of at least 50 percent). The analysis also takes into account state-owned companies at the central and local levels, using data provided by the Ministry of Finance.

Romania has more than 1,400 state-owned enterprises at the central and local levels. Of these, approximately 80 percent are owned by local or municipal governments, with the rest owned by the central government. Together, they created about 8% of the total output of non-financial companies and attracted about 4% of the total workforce. In addition, they received state subsidies and transfers totaling about 0.7% of GDP.

According to the World Bank, the state’s influence has increased in the last decade through the creation of several state-owned companies, citing the case of Bucharest City Hall, which established approximately 22 new state-owned enterprises “in several sectors without a clear economic rationale.” “. Such an increase in the presence of state-owned companies, combined with the absence of a competitively neutral policy, hinders the functioning of the market.

The activities of Romanian state-owned enterprises include activities without a clear economic justification, especially in the field of production and food.

As in many countries, Romanian state-owned enterprises do not always operate under the same rules and conditions as private enterprises, and the advantages and privileges they enjoy can create an unequal position vis-à-vis private firms, thus distorting key market outcomes and limiting the efficiency of the distribution of resources between companies and sectors, the document of the World Bank also shows.

The inefficiencies of state-owned companies, especially in key sectors that provide essential resources for other sectors, combined with their low profitability and higher wages, create a significant burden on public finances and economic growth, the document also highlighted.

Historically, SOEs have had higher levels of debt, including more indebtedness to suppliers. Weak management of state-owned enterprises and government support for industries that are in decline but where the state has a significant presence (such as railways) have led to a misallocation of resources to less productive firms.

Read the full World Bank analysis here