Romanian government plans new drive to improve management of state companies

By bne IntelliNews February 19, 2016

Romania’s government plans to start introducing better corporate governance and professional management at 25 state owned companies from March, the secretary of state of the ministry of economy, trade and business environment (MECRMA), Sorana Baciu, said on February 18.

Bacui indicated that pushing through corporate governance reforms at state owned enterprises (SOEs) would be a priority for Dacian Ciolos’ technocratic government, during its one year in office. Better management of SOEs would help reduce their burden on the public purse as well as paving the way for privatisations, including via IPOs. However, previous efforts to improve management of SEOs have had mixed results.

Baciu told a conference organised by the Bucharest Stock Exchange that the government had analysed 114 companies and selected 25 for the first stage of the project, which will see ordinance 109, covering corporate governance in state-owned companies, enforced at the companies. Those on the list for the first stage, which will start in March, include 13 of the 56 companies controlled by the economy ministry.

She added that while appointing professional management was important, “bringing in professional management alone is not enough ... the state must exert its role as a shareholder in a professional and transparent way".

Ciolos’ government was appointed in late 2015, and will only be in power until the general election due to take place in late 2016. However, Baciu stressed that the programme should continue under future governments. “The process will start this year but will be continued consistently in future ... once started, I hope that the process will be irreversible,” said Baciu.

The ongoing revision of the ordinance - the revised version is currently being considered by the parliament - was not an obstacle to the plans, Baciu added.

Cleaning up management of SOEs has been a struggle in Romania and other countries. A 2012 International Monetary Fund (IMF) report pointed out that inefficient SOEs are an “economic burden” for Romania, and that “poor governance is the proximate cause of inefficiencies in state-owned enterprises” in the country.

In a recent interview with bne IntelliNews, Laura Stefan, anti-corruption expert at think tank Expert Forum, said that political control of SOEs was one of the aspects “intrinsically wrong with the system” in Romania. “There is now talk about SOEs, which is a good thing,” she added.

Earlier efforts to improve management of SOEs received a cautious welcome from Romania’s business and investor community. In a December 2014 letter to former prime minister Victor Ponta, the Coalition for Development of Romania, which represents businesses in Romania, described the adoption of ordinance 109 as a “positive decision”, and noted the improved financial performance of several SOEs including Romgaz and Transelectrica following the implementation of the ordinance. The coalition did, however, raise concerns including the continued “questionable politically driven appointments” at state companies.

 

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