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SGGR : State Guided Governance Regime

State-Guided Governance Regimes are those where the state guides most financial and capital-intensive economic activity to facilitate national economic development, whilst also allowing private sector companies to develop.

Definition

Equity markets

Small relative to GDP and usually only open to domestic investors, except on a very selective case-by-case basis. Singapore is an exception because of its almost unique status as a city-state where the listed company universe has a very high level of international exposure relative to GDP. The currency is usually subject to some degree of state control or guidance under a GGR. The level of external accountability and transparency tends to be low, although Singapore is again an exception in this respect.

Whilst there will be privately controlled companies, most large-scale capital expenditure takes place under close government guidance and monitoring. Companies will however be exposed to market disciplines through competition with foreign firms, usually in the export markets. The major distinction between State-Guided and Authoritarian Governance Regimes is that the private sector generally plays a bigger role in the former while commercial considerations have a higher priority.

Broader economy

Challenges
and potential change factors

The influence of the state can lead to issues of moral hazard and ‘too big to fail’. The government must choose the most appropriate stage in the economy’s development, both to give the private sector more autonomy and also to deregulate the financial sector and move towards a more market determined exchange rate system.

Markets