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Governments need to prepare exit strategies from companies they backed during crisis

Prestigious PricewaterhouseCoopers study sets out the need for governments to act as the runway for future growth

As the economic crisis bites, CEOs support government intervention, but are seeking more effective leadership, improved business-to-government collaboration and smarter regulation to improve the future prospects of the global economy, says the latest PricewaterhouseCoopers report entitled Government and the global CEO: Redefining success. The report draws on the results of the prestigious CEO Survey, and adding to it with valuable insights from key government officials.

Key report findings include:

• A remarkable 10% of companies surveyed had some form of government backing, with state ownership spread across all industry groups.
• 57% of government-backed CEOs see high quality customer service as critical compared to 67% of CEOs with no government backing
• Wider stakeholders such as government (63% of government-backed CEOs compared to 47% for other CEOs) and local communities (37% compared to 27%) exert a strong influence.
• Over-regulation is still a top three issue for CEOs: this year 55% of CEOs remain concerned or extremely concerned about over-regulation as an obstacle to growth.

Jiří Halouzka, PricewaterhouseCoopers Public Sector Leader for CEE, said:

“The survey produced an interesting conclusion: Most CEOs consider regulation as being too strong but at the same time they believe it is insufficient in many areas such as capital markets. As a result, they call for a smart regulation that will effectively manage areas that need it but won't be a burden.”

Citizens, as taxpayers, have become the new owners and guarantors (through loans) of large sections of business. As government-backed companies appear to be less focused on customers and more so on government stakeholders, there are risks from long-term government backing.

“It could potentially damage innovation and quality of service. Governments need to make early decisions on exit strategies for businesses they have backed through the crisis, but which ultimately must stand alone,” added Jiří Halouzka.

The report outlines three implications for government emerging from the current crisis:

• National governments will have to balance much more explicitly the viewpoints of their local and national communities with those of the international community.
• We are moving from a competing society to a collaborating society, with businesses and nations competing within an increasingly global set of governance arrangements.
• Governments need agile management mechanisms to cope with the speed and complexity of decision-making in a modern global economy.

“Today's economic situation clearly shows the global interconnection of economies. CEOs thus call for more coordination among national governments in the area of regulation. A problem that was created somewhere in the world cannot be resolved by a local regulation no matter how good it is. Are goverments about to follow the economy and become globalised as well?,” concluded Jiří Halouzka.

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