The Role of State Owned Enterprises in the Economic Liberalization of Liberia

Abstract

Over the last three decades, the performance of state-owned-enterprises (SOEs) has been disappointing while the liberalization and privatization of SOEs has been treated with doubts. Policy makers around the world were left with few SOE policy options at a time when their performance caused not only administrative headaches but also political nightmare. The situation in Liberia is similar where a sizeable SOE sector has underperformed and the government has been hard pressed to find solutions to enhance their performances prior to the liberalization program. In this thesis, we examined whether the government imposition of hard budget constraint on SOEs has affected the operations of SOEs. We made a performance comparison of 20 Liberian SOEs between periods when they were under the Liberalization and privatization pressure during 2000-2017 and a period under which they were subject to little liberalization pressure. After conducting time-series and cross-sectional (TSCS) regression analysis with a dataset from 20 Liberian SOEs, we found there existed a statistically significant positive relationship between the Liberalization pressure and the operating efficiency of SOEs. This implies that while finding ways to Liberalize and or privatize SOEs, policymakers need to continually apply liberalization pressures on SOE managers in order to impose hard budget constraints on SOEs.

Keywords: Liberalization pressure, liberalization policy, soft budget constraint, operating performance, state-owned enterprise

DOI: 10.7176/JESD/10-16-08

Publication date: August 31^st 2019