Center for Policies and Management: Reform of state-owned enterprises must be a government priority

SARAJEVO, (Patria) - The International Monetary Fund's report on the state of state-owned enterprises was presented yesterday in Banja Luka.

One of the main conclusions of the report presented yesterday is that public enterprises in BiH are over-indebted, that they are managed non-transparently, and that there is no accountability of management for the results they achieve.

The Center for Policies and Management has been warning for years about the poor state of state-owned enterprises, pointing out the specific challenges faced by individual enterprises. We have provided decision-makers with proposals for concrete measures to improve the situation, and CPU has placed the issue of business efficiency and the reform of enterprises with majority state ownership in focus, including in the set of priority policies for the 2018-2022 mandate, which was submitted to all parliamentary representatives in BiH, the Center announced.

One of the IMF's conclusions is that there are no financially strong state-owned companies in the RS entity. CPU notes that in the FBiH, even state-owned companies that are perceived as economic giants due to their preferential market position do not operate efficiently, and their capacities are continuously weakening.

"The revenues and net profit of the two telecommunications operators majority-owned by the Government of FBiH - BH Telecom and HT Eronet have been constantly decreasing, observing the period from 2010 to 2017. The (in)efficiency of public enterprises is also evident through the analysis of efficiency in the implementation of public infrastructure projects in BiH - in the period from 2014 to 2018, enterprises with majority state ownership implemented significantly less funds in infrastructure projects than planned by entity public investment programs. Autoceste FBiH implemented projects worth 15.7% of the value of proposed projects, Ceste FBiH 20.8%, Elektroprivreda BiH and Elektroprivreda HZHB only 1.3%, Autoputevi RS-a 14.5%, Putevi RS-a did not implement any project, while Elektroprivreda RS-a implemented 3.6% of the value of planned funds," the statement said.

The IMF, they add, included Autoputevi, Putevi, and Elektroprivreda RS in its report in the group of companies with "very high financial risk".

"For state-owned enterprises to become efficient, they must fully apply the principles of corporate governance. For this to happen, members of the supervisory boards of state-owned enterprises must be competent and ethical, and possess knowledge of corporate governance. The supervisory board must be responsible for the selection of professional managers, who will be accountable for the success of the business and rewarded in accordance with the company's business success. State-owned companies must be led by professional managers and businessmen, without the influence of political parties, and governments in BiH must start behaving responsibly towards the property and interests of citizens," say CPU.

The IMF also commented on the work of the Investment and Development Bank of RS, pointing out that it has very broad powers, and that there is no state agency that supervises its work.

The Center for Policies and Management has pointed out in several published analyses the measures that will result in the improvement of the business operations of entity development banks through the redefinition of the development goals of both development banks, increased transparency and efficiency in operations, and the improvement of the appointment process of management structures.

"In our reports on the implementation of reform measures defined within the framework of BiH's arrangement with the IMF, we have pointed out the necessity of giving greater powers to the Deposit Insurance Agency of BiH for the supervision of the work of banks in BiH, including entity development banks. We note that the Agency was supposed to receive these powers with the adoption of the new Law on Deposit Insurance in Banks of BiH, which has not yet been adopted," say CPU.