Conclusion: Measures to Reduce Regulatory Costs and Reform of State-Owned Enterprises

The legal theory of state-owned enterprises (SOEs) posits that SOEs persist due to legal failures rather than market failures. It views privatization fundamentally as a process of legalization rather than liberalization. Privatization does not always suggest the state’s withdrawal from private sectors; in many cases, it is accompanied by expanded or stricter regulatory oversight. This perspective generates two implications. First, the successful reform of SOEs depends on the state’s ability to clearly define its control and establish institutions that deter opportunistic actions. A judiciary capable of effectively distinguishing between government opportunism and the legitimate exercise of power – thereby restraining abuse of power while upholding lawful decisions – is crucial. Second, if the government can develop effective regulation of private firms without ownership, the need for maintaining SOEs diminishes. Given the advantages of private firms in terms of ownership costs, further investment in developing robust legal and regulatory institutions could promote social efficiency by reducing the role of SOEs.