Position note on the transparency and disclosure of information on the economic activity of state-owned enterprises and trading companies from the Republic of Moldova

Publishing date: Friday, 11 November 2016
Views: 8485

The results of the state-owned enterprises and trading companies with the State participation from the Republic of Moldova show some gaps in transparency and implicitly highlight the need to strengthen the efforts in order to remove the misalignments that limit the public’s access to information on the performance of these entities . Besides, these deficiencies are caused by gaps in the general regulatory framework (even the optional one) and by the lack of effective mechanisms needed to raise awareness among all stakeholders involved in the external reporting of information, aiming at strengthening the managerial discipline and making the public property management more efficient.

Despite the efforts made by the Government to privatize the public property, it still has an important share in many sectors of the national economy. Thus, the management, control and reporting of economic entities with State participation are very important, including in the light of certain sustainable practices of corporate governance. Simultaneously, a range of international organisations, such as OECD, World Bank, IMF highlight how important it is to ensure transparency of their activity for the general public, especially, given the more intense debates about public debt, corruption, conflict of interests, underground economy and tax burden. For instance, OECD Guidelines on Corporate Governance of State-Owned Enterprises clearly show that the lack of transparency may indicate the existence of some gaps related not only to the management of the economic entities in question, but also to the State’s failure to manage efficiently the available resources.

In addition, the management of economic entities with State participation face many challenges that have an implicit impact on the transparency due to their close relationship with the executive/legislative power and policy makers (sometimes even political affiliation). Simultaneously, the relation may be deemed as a major risk for an effective corporate governance, which, inter alia might materialise in the following directions:

• Commitments and liability resulting from this interference create a favourable environment for corruption;
• In certain circumstances, the apriori favourable posture of economic entities with State participation may distort the market due to unfair competition or different conflicts of interests;
• The probability that other state-owned economic entities or bodies could act as both clients and suppliers creates a potential risk for a correct public procurement;
• A “relaxed” attitude from the part of bodies in charge of control towards actions undertaken to verify compliance with the legislation;
• The special status of economic entities with State participation in relation to the private sector implies an increased protection against certain major risks, even in the context of a deficient management;
• Last, but not least, if the society does not exercise any pressures on the management of these entities, “protected” by the State, the motivation to use efficiently the public financial flows could be undermined.

These risks are more visible especially when people have the feeling that the public property does not work as it should work or that it is not managed properly. Besides, the non-transparent management of public property makes nothing else than confirm these hypothesis, which could cause systemic problems at all levels.

Therefore, the transparency and disclosure of information about the economic activity of these entities are vital for an efficient management of public property, in accordance with the best corporate governance practices. Moreover, an effective system of transmission and dissemination of information in a quick and reliable manner to the general public may help not only ensure the integrity and efficiency of public property, but can also serve as a means to increase the credibility in authorities and their overall activity.

Read the position note

 The publication was financed by the British Embassy in Chisinau through the Good Governance Fund. The content of this publication is the sole responsibility of the author and does not necessarily reflect the opinion of the British Government.

Tags: Natalia Chitii


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