With colossal losses burdening the state budget, the urgency of reforming public enterprises is well established. Necessary and salutary, this reform passes, however, by the revision of the relation of the State with its companies.
The reform of the state enterprise sector is essentially aimed at reinvigorating them and making them competitive and efficient companies. Privatization is not an end in itself. Good governance, better transparency, greater efficiency in the service of the economy and public services… The reform must be carried out with a view to efficiency. Isn’t market efficiency the very essence of any economic reform? The creation of public enterprises in several sectors of activity, including the so-called “competitive” sectors, was justified by the desire to make these enterprises a springboard towards the development of strategic sectors, and this, by having access to financing and playing the role of economic engine. Except that these companies, which have for the most part become loss-making, now weigh heavily on the State budget and suffer from structural dysfunctions preventing them from providing public services in an optimal way and from achieving the objectives that are assigned to them.
A confirmed poor performance
In 2022, total transfers from the State to public enterprises peaked at 12.4 billion dinars, showing an increase of 15.6% (compared to 2021), driven by the evolution of transfers made to the profit of businesses in the economic sector (+15.5%). This amount represents nearly 29% of budgetary expenditure and 9.3% of GDP. Public enterprises operating in the economic sector take the lion’s share with a total of 8,787.6 million dinars, i.e. nearly 70.7% of all transfers made in 2022. Since 2019, these expenses have been increasing, recording an average growth of 12.8%. Transfers for salary expenses amounted to 1.2 billion dinars, while funds transferred for investments did not exceed 814 million dinars.
Other indicators also shed light on the chronic financial difficulties of public enterprises. Indeed, over the years, their deficit has continued to grow, while they are struggling to get going and reconnect with performance and profitability. The recent report of the Ministry of Finance on public companies revealed that in 2020, 81 companies out of a total of 111 public companies and establishments recorded an overall deficit net result of 2.455 million dinars, a decrease of 1.280% compared to compared to 2019. Over the period 2019-2021, the debt of public enterprises vis-à-vis the State continues its upward trend to reach 8.27 billion dinars in 2021 (an increase of 11.6% compared to 2020).
With the Russian-Ukrainian crisis, the financial situation of public companies has become bogged down: the 2022 report on the reform program evokes, in this sense, the impact of the conflict, especially on air and maritime transport companies (given the importance of the Russian market). Other establishments, such as the Cereals Office or the National Oil Office, have had to bear the brunt of the unprecedented rise in the prices of basic products and fuels with a knock-on effect on other institutions. This situation is, without doubt, the cause of the amplification of the financing and liquidity difficulties faced by most public enterprises.
A dilemma to solve
Several cyclical but also structural factors explain this poor performance. The explosion of the wage bill, the inability to generate enough income (due in particular to social tensions), the subsidized and administered price policy which reduces the profit margins of various companies, the shortcomings observed at the level of management… have all contributed to the deterioration of the financial situation of public enterprises in recent years. But it must be said that there are even deeper reasons why these establishments are limping and struggling to recover.
The white paper on public companies, which was published in 2018, evokes, in this respect, an obsolete legal framework, a fragmented shareholder structure, a role of the State to be redefined, limited accountability of boards of directors, cumbersome controls and insufficient transparency.
The various experiments that have been carried out in several countries around the world highlight an axiom: the overhaul of public enterprises requires a review of the relationship between the State and its enterprises, which relationship should make it possible to respond to the dilemma opposing autonomy, responsibility and “non-commercial” objectives to be achieved.
This is why the reform of governance is one of the actions prior to the recovery of public enterprises. The Korean experience can be an instructive example in this respect. The reform of Korean public enterprises, which was carried out in the 1980s, made it possible to significantly reduce state intervention and to make managers aware of the performance of these enterprises.
A system for identifying and monitoring objectives has been set up for this purpose. The results were clear: following three years, public companies have significantly improved their profitability. It is that the reform of public enterprises may not be a distant promise, but a virtuous dynamic that translates into concrete measures, actions and above all a vision.
Set course
2023 should be a pivotal year that would have marked a decisive turning point in the process of reforming public enterprises in Tunisia. The approval, last February, of the overhaul of the law on the governance of public enterprises is a first important step that has been taken in this direction, since the government has already set the major axes of this reform.
The national reform program mentions, in this sense, the following objectives: the development of a strategic vision of the role of the State in public enterprises, the drawing up of a list for the strategic sectors, the realization of a audit of public enterprises (through the recruitment of external firms), development of a program for clearing arrears and settling cross-debts, preparing a restructuring program, improving governance through revision of the legal and regulatory framework. It now remains to set the course in order to be able to move this reform forward at a brisk pace.
