PARIS - Subsidies - direct and indirect - are one major reason why governments are concerned about the participation of state enterprises (SEs) in industrial supply chains. To the extent that SEs obtain more support than their private peers, this could constitute an important source of distortions to competitive neutrality, markets, and trade.
Available evidence for 14 key industrial sectors shows that SEs receive relatively more support than their private competitors. Data drawn from the OECD MAGIC (Manufacturing Groups and Industrial Corporations) database indicates that the subsidies firms receive relative to their revenue tend to increase with the extent of their ownership by state entities.
This generally holds true for government grants and for below-market borrowings. Overall, firms with less than 25% government ownership receive relatively less support than other firms covered in the study.
Shocks and global supply chains
Recent supply disruptions and increasingly uncertain economic and geopolitical environments have brought the effects of shocks on the global economy to the forefront of policy and business discussions.
A new OECD report unpacks some of the broad risks associated with output disruptions occurring in domestic and foreign sectors, noting that countries closely connected to major economies through supply chains are more exposed to foreign production shocks.
To avoid disruptions and better navigate shocks, countries must enhance supply chain resilience.
