BEYOND PERCEPTIONS
CLIENTELISM ASSESSED OBJECTIVELY
2. Misappropriations of public monies from
state-owned enterprises
Romania
Ana Otilia Nuțu
[email protected]
Bruxelles, Dec 2012
1
Off-budget misappropriations
Distortionary allocations for clientelism can
evade scrutiny moving from:
● Budgets – cash
● Arrears (“accruals”)
● State owned enterprises resources
● Private money, through regulation (e.g.,
gas)
8
7
6
5
4
3
2
2006
2007
2008
Cash deficit
2009
2010
2011
SOE arrears
2
Measurement
Two main ways to misappropriate funds from
SOEs:
1. Overstated public procurement
SOE concludes non-competitively
purchase contracts at above market
price with favorite partners
2. Understated sales
SOEs sells non-competitively at below
market prices to favorite partners
Measurement: benchmark with market price,
compare profitability rates of companies
3
Corporate governance issues
Distance between manager and shareholder
Providers of public goods or social services
(state pays so that SOE delivers to citizen);
vs provider of commercial goods (citizen
pays in full).
Ex: Passenger railways vs energy company
Public good provision: to be paid in full by
budget
Profitability measurable and comparable
with private sector
4
Overstated procurement
Issue: SOEs contract non-competitively with
favorite partners at above market prices
E.g., Hidroelectrica divested maintenance to Hidroserv
subsidiaries; renegotiations reduced costs by 30%
Employment / “sinecures” (IMF report):
5
Understated sales
Issue: SOE sells at below market price to
favorite partners
E.g. Hidroelectrica sold 12 TWh in 2011 @ 121
RON/MWh; average market price in 2006-2011 192
RON/MWh, foregone revenue 852 mn RON (about
200 mn EUR).
Clients: trans-party; loss approx constant across time;
frequent renegotiation
Measurement: Foregone profits; profitability
6
Understated sales
Foregone profits:
2500
2000
852
1500
1000
500
0
Market
Smart guys
Value
Profitability:
Loss
50
40
30
20
10
0
Turnover/employees
Alpiq Romenergie (smart guy)
Profit/employees
Repower
7
Benchmarking to private sector
IMF monitoring
Gross Rsults per Employee (RON)
2008 2009 2010
2,944
370
State owned
-5,123
-7,007
-9,483
State owned - central level
Private
-1,100
-8,680
-15,872
-22,240
Source: MOPF, INS, Trade Registry, authors'
8
Data needs
1. Market prices across time (OPCOM;
competitive markets; international
benchmarks)
2. Information about contracts by
company, quantities and prices
3. Political affiliation (if contracts not transparty)
4. Data from Ministry of Finance – balance
sheets of companies
9
Indicators
• Foregone profits as share of turnover,
SOE industry average
• Profitability of companies that have
contracts with the state as % of the
others’; in some cases, political affiliation
• Profitability of SOEs compared to industry
average (where competition with private
companies); with average private sector
profitability; or with similar SOEs abroad
10