This presentation was made by Elva Bova, EC, at the 19th OECD Senior Financial Management and Reporting Officials Symposium held at the OECD Conference Centre, Paris, on 4-5 March 2019

1. Public Assets and their management
in the EU
19th Annual Meeting of
OECD Senior Financial Management and Reporting Officials
Elva Bova
DG ECFIN, Fiscal Governance Unit
OECD Conference Centre, Paris
4-5 March 2019

2. Outline
• Introduction
• Financial assets
• Non-financial assets
• Management practices
• Way forward?

3. Introduction (1)
Motivation:
Public assets bear implications for a country's fiscal position and
medium-term sustainability:
• Source of public finance flows;
• Source of fiscal risks;
• They can be used as fiscal buffers;
Background:
European Parliament's initiative; tender awarded to the
consortium of KPMG Advisory S.p.A. and Bocconi University in
February 2016.

4. Introduction (2)
Contribution:
• First EU comprehensive review of public assets (all Member
States, 2015 data);
• Broadest dataset for public equities in companies (PSHs)
based on firm-level data (Orbis database);
• Novel estimation techniques for non-financial assets;
• First EU wide analysis of management practices for these
assets;

5. Financial assets
AF.1 Monetary gold and special drawing rights
AF.2 Currency and deposits
AF.3 Debt securities
AF.4 Loans
AF.5 Equity and investment fund shares or units
AF.6 Insurance, pension and standardised guarantee schemes
AF.7 Financial derivaties and employees stock options
AF.8 Other accounts receivable
Non-financial assets
AN.1 Produced assets
AN.11 Fixed assets
AN.111 Dwellings
AN.112 Other buildings and structures
AN.113 Machinery and equipment
AN.114 Weapons systems
AN.115 Cultivated biological resources
AN.117 Intellectual property products
AN.12 Inventories
AN.13 Valuables
AN.2 Non-produced assets
AN.21 Natural resources
AN.211 Land
AN.212 Mineral and energy reserves
AN.213 Non-cultivated biological resources
AN.214 Water resources
AN.215 Other natural resources
AN.22 Contracts, leases and licenses
AN.23 Purchases less sales of goodwill and marketing assets
Public Assets in ESA 2010
Airports, ports,
railways, roads

6. Financial assets

7. Financial assets (1)
Note: Asset values weighted by stake(s) owned by the public sector.
Source: KPMG and Bocconi University based on Orbis (BvD)
Examining about 37,000 firms with public stakes financial assets are
estimated at 40% of EU GDP in 2015…
0
20
40
60
80
100
120
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
DE ES IT PL BG AT HU FR RO SE FI UK CZ HR BE SI PT LV DK NL SK EE LT IE LU EL MT CY
%ofGDP
NumberofPSHs
PSHs
Assets (rhs)

8. Financial assets (2)
0%
20%
40%
60%
80%
100%
Public ownership
Minority (<10%)
Influential
(50%<10%)
Control (>50%)
Fully public
In almost half of these firms the government has full ownership,
and in more than 20% it has majority control…

9. Financial assets (3)
9
2.0% 4.2%
3.4%
19.0%
39.6%
6.3%
25.5%
By number of PSHs
Agriculture, forestry and
fishing
Financial and insurance
activities
Information technology
Real estate
Services
Trade and manufacturing
Utilities
0.2%
59.2%
1.5%
6.3%
4.5%
3.7%
24.6%
By asset value
Most firms are service and utility providers, but most assets are
concentrated in the financial sector…

10. Financial assets (4)
 Although they represent 0.1% of total EU firms, they employ about 1.9% of
total employment.
 Although high labour costs, their profitability is close to private peers.
 Despite higher NPLs ratio, financial PSHs are slightly better capitalised than
private firms.
Their contribution to the economy is quite substantial….

11. Financial assets (5)
Source: KPMG and Bocconi University calculations based on Orbis (BvD) database
The contribution to public finance could be 0.4% of GDP but…
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Austria
Belgium
Bulgaria
Croatia
Cyprus
CzechRepublic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UnitedKingdom
EU28Countries
Distributed income of corporations Total Profit (PSHs) Total Income (PSHs)
% of GDP

12. Non-financial assets

13. Non-financial assets (1)
Data on non-financial assets are scarce and heterogeneous:
• Only few international databases, with gaps (OECD, Eurostat , IMF
GFS)
• National sources – or asset-specific sources (the EU Building Stock
Observatory…) have discrepancies in accounting and valuation.
• Estimation using various secondary sources (DG Move, CIA
Factbook…) and valuation methods.

14. Non-financial assets (2)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FR
DE
UK
IT
ES
SE
NL
BE
PL
AT
CZ
RO
IE
FI
DK
EL
PT
HU
HR
BG
SK
SI
LU
LT
LV
EE
CY
MT
0%
50%
100%
150%
200%
250%
Billioneuros
%ofGDP
Non-financial assets Non-financial assets (%GDP rhs)
2015
Source: KPMG and Bocconi University calculations
Based on Eurostat data and on asset-specific estimations, non-
financial assets are about 71% of GDP in 2015.

15. Non-financial assets (3)
Source: KPMG and Bocconi University calculations
0
2,000
4,000
6,000
8,000
10,000
12,000
Dwellings Buildings
other than
dwellings
Ports Roads Railways Airports Mineral
and
energy
reserves
Other
natural
resources
Non-
financial
assets
Bn Eur and in
brackets % of
GDP
(2.4%)
(70.8%)(20.1%)
(2.8%)
(0.4%)(2.8%)(24.4%)
(0.7%)(17.2%)
Within this, roads and other natural resources (including land) are
the largest components..

16. Management
practices

17. Management and investment (1)
From a review of multiple published sources, the study finds that:
• For most assets, strategic decisions are at central government level.
• An entity for PA management exists only for few MS and assets.
• A unique, comprehensive and consolidated national public data
source for all assets is missing in most MS.
As regards investment decisions, the study finds…
• Reduction of financial assets in most MS and of real estate assets for
1/3 MS.
• Investments in airports, ports and roads involve the private sector,
investments in railways the public sector only.
• For MS with strategy for mineral reserves and natural resources,
investments involve the private sector.

18. Management and investment (2)
A review of 8 country case studies on asset sale and
acquisition finds:
• no substantial impact on market share and efficiency.
• improved profitability after privatisation, also on account
of large investments and reorganisation.
• improved solvency after asset sales and acquisition, due
to other changes (recapitalisation or assumption of private
debt).
• privatisation may increase the workforce, not
immediately.
Overall, the timing of the operation, transparency and a
broad-based consensus play an important role.

19. Way forward?

20. Conclusion
Main findings:
• PSHs contribute to the economy and to public finance.
• Poor data (especially for NFA).
• Governance models diverse, fragmented and at times
underdeveloped.
Going forward:
• Need for comparable databases on public assets.
• Exchange of best practice in the management of these
assets.
• How to consider assets in assessing a country’s
creditworthiness?
• How can their knowledge reduce fiscal risks?

21. Thank you for
your attention

22. D.42
D.43
AN.21 Natural resources D.45 Rent
P.11 Market output
P.12 Output for own final use
P.131AN.113 Machinery and equipment Payments for non-market
output
Public assets Non-tax revenue
AF.2 Currency and deposits
D.41 Interest
AF.3 Debt securities
AF.4 Loans
AF.8 Other accounts receivable
AF.5 Equity and investment fund shares
or units
Distributed income of
corporations
Reinvested earnings on
foreign direct investment
AN.111 Dwellings
AN.112 Other buildings and structures

23. 23
Item Source Item Source Item Source
Dwellings
Public dwellings
(sq m)
Eurostat/Entranze/EU
Building Stock
Observatory
Price Eurostat
Buildings
Public buildings
(sq m)
Eurostat/Entranze Price Eurostat
Ports Port traffic Eurostat Price
Mergermarket
database (from
previous sale)
Airports Airport traffic Eurostat Concession fees
Financial
statements of
airport
Government default-
free bonds
Market
indicators
Roads
Km per type of
road
DG Move Cost per Km
DG
Regio/EIB/ECA/WB
Report
Country specific
construction costs,
road infrastructure
investment & road
life
Eurostat-OECD,
DG Move,
Canning 1998
Railways Km DG Move Cost per Km DG Regio/EIB/ECA
Country specific
construction costs,
investment & railway
life
EEA/UNDP/Eurost
at/OECD, DG
Move, Canning
1998
Mineral and
energy resources
Stock of proven
reserves
CIA
Price
BrentICE/Generic
1st Natural Gas
Market indicators
Other natural
resources
Land Eurostat Price Eurostat
Volume Value Adjustments
Non-financial assets estimation & valuation

24. Investment strategies
24
Market share Profitability Efficiency Solvency
Acquisition of Valvitalia
Group stake by the Italian
Strategic Fund
Privatisation of Royal Mail
Indirect privatisation of
Empresa Geral do Fomento
Privatisation of Copenhagen
Airports A/S
Privatisation of AERO
Vodochody a.s
Re-municipalisation of energy
grids in Germany
Ràba Automotive Holding plc
The re-nationalisation of
Transpetrol a.s.

25. Ownership and
management
25
From six case studies:
Greece: the law for the HRAD Fund conferred credibility on
privatisation process, enhancing transparency and
accountability;
France: with 4 sectoral departments, APE is a good example
on how to maintain central coherence while ensuring skill
specialisation.
Finland: airport company Finavia Oyj is highly customer-
oriented, competitive and profitable.
UK: Network Rail a fully public company maintains some
autonomy in investment decisions.
Italy: AdD real estate management allocation between local
and central governments.
Poland: motorways discusses and compares a concessionary
arrangement with a PPP agreement.