A state-owned enterprise is a company that the government owns. It can be fully owned or partly owned by the government. The main goal of a state-owned enterprise is to take part in business activities that help the country.
Governments create these companies to manage important industries like oil, electricity, transport, or finance. These businesses do not work like normal government departments. Instead, they operate like private companies, but with government support or control.
What Do State-Owned Enterprises Do?
A state-owned enterprise helps the government do business in areas that are too expensive or risky for private companies. For example, if a country has oil or minerals, the government often sets up an SOE to manage those resources.
These companies often deal with other companies to extract oil, gas, or minerals. They may also get money from royalties instead of actual payments. This means companies pay the government a share of their income from using the resource.
Besides managing resources, a state-owned enterprise can also sell goods or services. In many countries, SOEs manage electricity, water, postal services, or public transport. In some places, the government uses SOEs to make sure the country gets basic services, even if they do not make a profit.
Examples of State-Owned Enterprises
Here’s an overview of notable state-owned enterprises (SOEs) from around the world, highlighting their roles, operations, and significance:
🇺🇸 United States
1. Fannie Mae (Federal National Mortgage Association)
- Established: 1938 by the U.S. Congress
- Purpose: To expand the flow of mortgage funds in all communities across the nation
- Operations: Purchases mortgages from lenders, pools them into mortgage-backed securities (MBS), and sells them to investors, providing liquidity to the housing market
- Impact: In 2023, provided $369 billion in liquidity, supporting approximately 1.5 million home purchases, refinancings, or rental units
2. Freddie Mac (Federal Home Loan Mortgage Corporation)
- Established: 1970 by the U.S. Congress
- Purpose: To provide liquidity, stability, and affordability to the U.S. housing market
- Operations: Buys mortgages from approved lenders, securitizes them into MBS, and sells them to investors, similar to Fannie Mae
- Impact: Over the last 12 months, financed 820,000 single-family home purchases and 550,000 multifamily rental units, with 92% of apartments affordable to moderate- and low-income renters
🇨🇳 China
Jin Jiang International (Holdings) Co., Ltd.
- Established: 2003
- Ownership: Owned by the Shanghai Municipal People’s Government
- Industry: Tourism and hospitality
- Operations: Operates hotels, resorts, and travel services worldwide, including brands like Jinjiang Hotels, Louvre Hotels Group, and Interstate Hotels & Resorts
- Scale: As of 2017, managed assets worth $6.16 billion and employed approximately 100,000 people
🇿🇦 South Africa
Eskom Holdings SOC Ltd
- Established: 1923
- Ownership: Wholly owned by the South African government
- Industry: Electricity generation and distribution
- Operations: Generates over 90% of South Africa’s electricity, supplying more than 86% of the country’s needs and approximately 20% of the electricity produced in Africa
- Infrastructure: Operates a mix of coal, nuclear, hydroelectric, and wind power stations, including the Koeberg Nuclear Power Station and the Sere Wind Farm
🇧🇷 Brazil
Petrobras (Petróleo Brasileiro S.A.)
- Established: 1953
- Ownership: Majority-owned by the Brazilian government
- Industry: Oil and gas
- Operations: Engages in exploration, production, refining, and transportation of oil and gas
- Recent Developments: In the first quarter of 2025, produced 2.77 million barrels of oil equivalent per day; launched the Almirante Tamandaré floating production vessel at the Búzios field
🇦🇷 Argentina
ARSAT (Empresa Argentina de Soluciones Satelitales S.A.)
- Established: 2006
- Ownership: Wholly owned by the Argentine government
- Industry: Telecommunications
- Operations: Provides satellite-based communication services, including internet, television, and data transmission, aiming to enhance connectivity across Argentina, especially in underserved regions
How Are SOEs Formed?
Governments sometimes create SOEs through a process called corporatization. This means they turn a government department into a company. The new company follows business rules and aims to make money. However, the government still owns it.
Corporatization allows the company to act like a business while still working for the country’s goals. In many developing countries, governments use SOEs to grow the economy. They place them in industries they want to improve, such as energy, mining, or communication.
Do State-Owned Enterprises Make Profit?
Not all state-owned enterprises make a profit. Some, like the US Postal Service, lose money. But they still provide important services. That is why the government continues to support them.
Some SOEs get bailouts from the government. These are financial help packages to keep them running. This usually happens when the SOE is too important to fail, such as those involved in power supply or transportation.
Even though they lose money, these companies play a big role in the country’s day-to-day life.
SOEs and Economic Growth
When well-managed, state-owned enterprises can help a country grow. They create jobs, support industries, and improve services. One successful example is Norway. The government owns many companies, but all shareholders are treated fairly. These companies are well-managed and profitable.
But this success does not happen everywhere. In South Africa, for example, many SOEs struggle. They face problems like poor management, corruption, or political interference. So, the success of a state-owned enterprise depends on good leadership and clear rules.
If an SOE has strong managers, clear goals, and no political pressure, it can do well. But if it lacks these, it may end up costing more than it earns.
Final Thoughts
A state-owned enterprise is a tool that governments use to take part in business. It helps manage key industries and provides services that people rely on. Countries like the US, China, Brazil, South Africa, and Norway all use SOEs in different ways.
Some SOEs make a profit and help the economy grow. Others need help from the government to survive. Their success depends on how well they are managed and how much freedom they have from politics.
If state-owned enterprises are managed well, they can help the economy grow and improve public services. But if they are run poorly, they can waste money and fail to meet their purpose. Good management, clear planning, and honest work are what make the difference.
