SOE employment has fallen from 56 percent in 2001 to 35.5 percent in 2004. In absolute terms, SOE workers are estimated to currently number about 221,900 using estimates of the SOE share of workers drawn from theLSMS and the corresponding figure for total official (formal) employment in BH (about 634,000).

Along with aggregate decreases in SOE employment are proportional decreases in the RS and FBH. In the RS, SOE employment now accounts for a mere 16 percent of total employment, compared to 24 percent in FBH. Across all industries, SOE share of total employment fell, with especially large fall in the manufacturing sector (from 71 percent to 38 percent). The smallest decrease in SOE employment is in the utilities sector. Some of the most SOE-dependent municipalities have seen their share of SOEemployment fall between 2001 and 2004 from, for example, a high of 88 percent of formal sector employment to 31 percent.

It may be argued that decreases in SOE employment are driven in large part by employment in voucher-privatized companies, where privatization has taken place but effective restructuring has not effectively been carried out. In which case, the fall in SOE employment is a “nominal” adjustment and not real labor adjustment, i.e., SOE employment has fallen nominally but workers are still employed by privatized state enterprises that are otherwise essentially unchanged.

Unfortunately, LSMS data do not allow us to establish whether an individual worker is employed by the same company over time. However, the data provide information on workers’ industry of employment and the size (number of employees) of their company. Using these two pieces of information, we can make inferences regarding the magnitude of “nominal” adjustment. In particular, if a given worker leaves the SOE sector between 2001 and 2004 but (a) he declares himself to be employed by the same industry and (b) the number of workers in his company remains essentially unchanged, then we use this as proxy for continued employment in a privatized company. Adding back into SOE employment these nominal adjustments, the results indicate that SOE employment still fell from about 35.6 in 2001 to about 24.1 percent of total employment in 2004.<sup>13</sup> How do these findings compare with other data sources that provide either direct or indirect estimates of the relative magnitude of SOE employment? First, estimates from BEEPS data provide complementary evidence that SOE employment has fallen over the 1999-2002 while growing in de novo private enterprises (see also World Bank 2005a). While employment in privatized enterprises also fell during this period, employment in state-owned enterprises fell proportionally more, indicating that as a share of total employment, SOE employment must have fallen.

> 13 The results indicate that about 10 percentage points of workers employed _outside_ the SOE sector in 2004 were previously employed by the SOE sector in 2001. Of the 10 percentage points, only 3.6 percentage points appear to be employed by the same industry by companies of the same size. This suggests that a substantial share of the fall in SOE (from 35.6 to 20.5) is accounted for by “real” adjustments and, classifying as SOE workers those who appear to be employed by the same (but now privatized) company indicates that SOE employment still fell from 35.6 in 2001 to about 24.1 in 2001 (or 20.5 + 3.6).

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