Fondul Proprietatea expresses significant concerns about a new legal draft, currently discussed in the Commitees of the Chamber of Deputies, which proposes the exemption of 100 major state-owned companies (SOEs) from the enforcement of corporate governance legislation currently in force. Some of the most valuable Romanian SOEs, operating in vital sectors, are targeted, including: Hidroelectrica, Nuclearelectrica, Bucharest Airports, Romgaz, Salrom, Constanta Maritime Ports SA, Transelectrica and CE Oltenia.
Fondul Proprietatea is appalled that the amendments are largely the same as those declared unconstitutional by the Constitutional Court in February 2018. The plenum of the Chamber of Deputies may vote on the issue this week.
If adopted in its current form, the exemption of 100 state-owned companies from corporate governance would represent a major step back in terms of economic credibility. It would have an extremely costly impact on Romanian SOEs, risking to transform them in mere black holes, due to the following factors:
- Total lack of transparency of SOEs and lack of accountability of their management;
- Unimaginable levels of arbitrariness, incompetence and derision in appointing SOEs management, leading to their complete political subordination;
- Lack of control and public scrutiny over expenditures of SOEs, making them soft targets of corrupt politicians.
“State-owned companies are owned by all Romanians who are perfectly entitled to have access to information on their situation and evolution. If corporate governance exemptions are adopted for so many state-owned companies, there will no longer be any obligation for them to periodically report any financial or operational information. We will most likely enter an era of total darkness in which we will no longer know anything about the performance of the SOEs, apart from learning a year or two down the road that some of the most successful Romanian companies, will then be on the verge of insolvency and we would be left wondering what happened in the meantime. This would be similar to letting Ali Baba’s 40 thieves into a bank vault, switching off the lights and the alarm system and then pretending to be surprised at the outcome. I am amazed that such a detrimental action would even be considered in view of Romania’s objective of becoming an Emerging Market country,” said Johan Meyer, CEO of Franklin Templeton Investments Limited and portfolio manager of Fondul Proprietatea.
He also pointed out that Fondul Proprietatea is extremely disappointed to see yet another attempt designed to curtail this critical legislation, part of a series of repetitive attacks that took place over the last 2 years. Meanwhile, in other emerging and developed markets, corporate governance is no longer a novelty, but rather represents the norm.
In this context, Fondul Proprietatea urges the Parliament to carefully consider the major negative impact of these exemptions and decide against adopting this infamous black-list of companies excepted from corporate governance. In the past, consequences of bad politically-connected management meant considerable losses for SOEs. Currently, these could be highly detrimental for a country that needs budget resources, wants to be an example in Europe in terms of competitiveness, and aspires to OECD standards and accession.