The Paradox of Soe Decentralisation: Evidence from Post-Colonial States

This paper examines the paradoxical outcomes of state-owned enterprise (SOE) decentralization in post-colonial states, challenging the conventional wisdom that links decentralization with improved efficiency and democratic governance. Drawing on evidence from Africa, Latin America, and Eastern Europe, we demonstrate that the transfer of SOE responsibilities to subnational governments has largely failed to deliver its promised benefits. The analysis reveals that subnational SOEs consistently underperform their national counterparts due to several structural impediments: insufficient economies of scale, inability to attract and retain qualified personnel, limited capacity for research and development, and increased vulnerability to local corruption networks. While decentralization theory, developed in Western democratic contexts, suggests that local control enhances service delivery and accountability, empirical evidence from developing nations indicates otherwise. The paper finds that national-level SOEs generally maintain superior technical capabilities and operational efficiency compared to their subnational counterparts. These findings necessitate a fundamental reassessment of decentralization as a governance reform strategy, particularly in contexts where institutional capacity and professional expertise are concentrated at the national level. The study contributes to our understanding of how varying governmental control structures influence SOE operations and outcomes in post-colonial states.