Some Considerations in the Performance Evaluation of State-Operated Enterprises

This paper describes a framework for evaluating the financial performance of state-operated enterprise (SOEs). The proposed framework maintains the distinction between commercial enterprises and service-oriented enterprises. In the first case, the sponsoring government is assumed to be concerned with the financial profitability of the enterprise; in the second case, the concern is with the provision of service at reasonable cost-recovery levels. It argues that the financial performance of the enterprise may be attributable to both exogenous market factors and constraints that are controllable through public policy, and that one of the objectives of any performance appraisal should be to identify these barriers to profitability or cost-recovery.