A strong community of practice  

As countries across the ECA region share similar challenges in reforming state-owned companies, navigating institutional, legal and political constraints, opportunities for peers to exchange practical experience across borders are more critical than ever to help translate knowledge into concrete progress.

The event, co-sponsored by the Vienna Development Knowledge Center (VDKC), included the formal end of the first edition of the World Bank’s SOE Leadership Training Program with a comprehensive E-Learning Program, combined with discussions and interactive sessions including experts from Austria, the World Bank and elsewhere.

“The Community of Practice plays a central role,” said Peter Istjan-Hölzl of Austria’s Ministry of Finance. “It has become a platform for ongoing dialogue among professionals who are directly involved in shaping and implementing SOE governance reforms. What makes this platform particularly valuable is its focus on practical, experience-based learning that complements formal training.”  

Participants shared tangible achievements and discussed remaining challenges with other participants in break-out sessions. Albania has reformed its state-owned water sector to consolidate fragmented local operators into stronger regional companies, and aims to move from sector-by-sector reforms towards a more coherent SOE governance and ownership framework.

Ukraine has updated its state ownership policy and aligned with OECD governance standards, and is implementing a comprehensive performance evaluation framework with a core focus on financial sustainability and non-financial performance indicators.

As well as approving a new corporate governance code based on OECD guidance, Moldova has developed a five-category triage system to screen SOEs for possible privatization, reorganization or liquidation.  

Montenegro has enhanced its SOE governance regulatory framework, prepared a draft law on SOEs and state ownership policy, and established a system for monitoring and reporting fiscal risks.

Speakers stressed the importance of strong, accountable and well-governed SOE ownership in order to avoid the pitfalls of fiscal losses, inefficiency, political interference, governance failures and crowding out private-sector investment.

“SOEs are more important than they used to be. They’ve become not only generators of profit for the state, but instruments of public policy,” emphasized Oana Petrescu of AMEPIP, the agency that coordinates and monitors corporate governance of Romania’s SOEs.

Risk and Resilience  

The solar power plant is flooded to a level that would normally destroy or critically damage the facility. But this plant had received investment to raise the panels above the predicted water level if flooding should occur. The damage was limited, repairs could be made, and the facility was not lost.  

The photograph is a powerful illustration of how effective risk assessment as part of strong corporate governance can protect any company – and a highly relevant lesson for State-Owned Enterprises (SOEs) undergoing far-reaching reforms across Europe and Central Asia (ECA).

“Corporate governance can help to shield and hedge against those risks,” explained the World Bank’s Ruggero Gambacurta-Scopello. “When you have a power plant, the transmission lines are facing a risk, and this risk has a cost, but most state-owned utilities don’t really measure this in a systematic way.”

When strategically designed and implemented, effective corporate governance of SOEs can simultaneously support government policy objectives while strengthening public finances and enhancing economic competitiveness.  

To further explore risks and potential measures facing climate change, participants were able to visit Vienna’s Climate Lab, an innovation center for action on climate and the circular economy, which supports collaboration between companies, government, startups, NGOs and the scientific community.

Leonie Machold of Wien Energie, Austria’s biggest energy utility and part of the Wiener Stadtwerke group owned by the City of Vienna, explained how reporting on sustainability factors is being integrated with financial reporting. “Sustainability reporting requires significant effort but creates clear strategic and financial value,” she said. “This can lead to improved financing conditions, such as better interest rates, when a credible Climate Transition Plan is in place.”

Overcoming the barriers

The meeting featured presentation of a recent World Bank publication on Corporate Governance Codes for State-Owned Enterprises: Rationales, Application and Experiences in Europe and Central Asia. The report concludes that although codes tailored to SOEs may provide more flexibility than general corporate governance codes, and can support transitional reforms, they also risk embedding divergent standards, and without robust oversight they can become box-ticking exercises.  

Participants were open about the challenges that often confront them, from weak boards and inadequate or fragmented governance frameworks to capacity constraints and a lack of management skills. Some felt there was not enough understanding of why reforms were needed, or a lack of political will to approve or implement new rules.  

In a poll, most said private-sector participation in their country’s SOE sector was inadequate, with too many legal and political barriers. Speakers underlined the frequent gulf between what private investors are looking for, and what SOEs often deliver – including not only negative factors but public-service and policy concerns. Solutions for narrowing the gap included being clear on the mission of the SOE, and establishing independent, professional boards with clear responsibilities, empowered to set strategy and take tough decisions.