Transcript Ownership Function and Strategic Management of State

T.R. PRIME MINISTRY Undersecretariat of Treasury
Ownership Function and Strategic
Management of State Owned
Enterprises in Turkey
Ayşe YİĞİT
06.09.2011
[email protected]
Outline
I. General Outlook for Turkish SOE System



SOEs in the Turkish economy
Classification of public enterprises
Major aspects of SOEs
II. Setting the Strategic Objectives:Budgetary and Strategic Documents




General Investment and Financing Program for SOEs
Mid-Term Program for General Government Sector
Strategic Plans
5 year Development Plans
III. Responsibility for Achieving the Strategic Goals


Responsibilities and Limitations of the SOE Management
Efforts for new SOE legislation
IV. Current Outlook and Future Expectations


Current Outlook: Problems and Opportunities
Vision and Future Prospects of Treasury in Terms of SOE Management
T.R.
Prime Ministry
Undersecretariat of Treasury
I. General Outlook for Turkish SOE
System
T.R.
Prime Ministry
Undersecretariat of Treasury
SOEs in the Turkish Economy
In the 1990s...



More than 60 different SOEs
Significant share in GDP and public investments
660 thousand employees
now reduced to...



27 SOEs
A lower share in GDP and public investments
186 thousand employees
as a result of mergers and privatizations.
T.R.
Prime Ministry
Undersecretariat of Treasury
SOEs in the Turkish Economy
Significant drop in gross sales...
18,3%
Gross Sales as %
of GDP
8,1%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Treasury P.
8%
9%
9%
11%
11%
10%
6%
5%
6%
5%
6%
7%
Privatization P.
5%
6%
5%
7%
7%
7%
8%
3%
3%
3%
3%
2%
Total
14%
15%
15%
18%
18%
16%
14%
9%
9%
8%
9%
9%
T.R.
Prime Ministry
Undersecretariat of Treasury
SOEs in the Turkish Economy
Lower share of public investments...
35%
1,4%
1,3%
30%
1,2%
25%
1,0%
Share of SOE
20%
Investments
0,8%
15%
0,6%
10%
0,4%
0,3%
5%
0%
0,2%
1999 2000 2001
2002 2003 2004 2005 2006
2007 2008
SOE/Total Public
29%
24%
14%
SOE/GDP
1,2% 1,3% 1,0% 0,9% 0,8% 0,6% 0,3% 0,6% 0,5% 0,4%
27%
29%
20%
19%
9%
17%
0,0%
13%
T.R.
Prime Ministry
Undersecretariat of Treasury
SOEs in the Turkish Economy
Lower levels of employment
Treasury P.
666 Th.
Privatization P.
Total
186 Th.
1985
1990
1995
2000
2005
2010
T.R.
Prime Ministry
Undersecretariat of Treasury
Classification of Public Enterprises
Public Enterprises
Financial Enterprises
Non- Financial Enterprises
Central Bank
State Owned Enterprises
Public Banks
Enterprises in Privatization Program (Former SOEs)
Other Institutions
(Lottery C., Housing Inst. etc.)
Municipality Enterprises
Enterprises of Savings Deposit Insurance Fund
Enterprises of Housing Inst.
Enterprises of Turkish Armed Forces
Foundation
T.R.
Prime Ministry
Undersecretariat of Treasury
Some Major SOEs
General Directorate of State Owned Enterprises
Transportation
Energy
Agriculture
Turkish Railways (TCDD)
Electricity Production (EÜAŞ)
Grain Board (TMO)
Turkish Post (PTT)
Electricity Transmission (TEİAŞ)
Tea Company (ÇAYKUR)
Airport Authority (DHMİ)
Natural Gas Distribution (BOTAŞ)
Agricultural Enterprises (TİGEM)
Coastal Safety (KEGM)
Oil Extraction (TPAO)
State Supply Office (DMO)
Hardcoal Mining (TTK)
Arms Manufacturer (MKEK)
Electricity Transmission (TKİ)
Boron Mining (Eti Maden)
T.R.
Prime Ministry
Undersecretariat of Treasury
Major Aspects of SOEs
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100 % Treasury share (SOE), (Privatization Administration portfolio not accepted as
SOE)

Ownership represented by Treasury

Subject to a special decree rather than Commercial Code

Capital injections and duty loss payments by Treasury

Investment approval: High Planning Council (secretariat performed by Ministry of
Development)
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Audit: Turkish Court of Accounts, inspection of certain issues by Treasury and line
ministry

Similar personnel and procurement legislation with general government units
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Members of board appointed by a joint decree (Line Minister, Prime Minister and
President)
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Approval of financial statements: Grand National Assembly
T.R.
Prime Ministry
Undersecretariat of Treasury
Major Aspects of SOEs
Composition of the Board (SOEs)
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Composed of 6 members one of whom is both chairman and the CEO
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5 of the members (including the chairman) are appointed upon the nomination of the
line minister
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2 members must be selected from the deputy CEOs of the company upon the
nomination of the line minister
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1 member is appointed upon the the nomination of the minister responsible from the
Treasury
Composition of the Board (Privatization Portfolio)
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Appointed upon the nomination of Privatization Administration and consent of Prime
Minister
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Privatization Administration: Attached to Ministry of Finance
T.R.
Prime Ministry
Undersecretariat of Treasury
II. Setting the Strategic Objectives:
Budgetary and Strategic Documents
T.R.
Prime Ministry
Undersecretariat of Treasury
General Investment and Financing Program for SOEs

Prepared in October by Treasury and Ministry of Development,

Privatization portfolio: Prepared by Treasury and MoD, Approved by
Privatization Administration

A financial forecast of the next year, prepared for budgetary purposes

Council of ministers decree
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Next year’s budget allocations of SOEs
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Main elements of SOE policy

Financial targets (Sales, operational P/L, labor productivity etc.)
T.R.
Prime Ministry
Undersecretariat of Treasury
General Investment and Financing Program for SOEs

Compulsory framefork for SOE budgets
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Recruitment caps
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Procurement procedures & Outsourcing caps
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Investment limits and programs

Budgetary transfers

Dividend payments

Some operational issues (i.e. price changes)
T.R.
Prime Ministry
Undersecretariat of Treasury
Mid-Term Program for General Government Sector
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Under the responsibility and coordination of Ministry of Development
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A basic evaluation of the budget and investment proposals of SOEs
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Investment decisions made by Ministry of Development
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Covers strategic issues:
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Mainstream expectations and policies
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Future investments and developments
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Necessary financing
T.R.
Prime Ministry
Undersecretariat of Treasury
Mid-Term Program for General Government Sector

Framework for general investment and financing program
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Mainly a financial forecast

Covers next three years, renewed every year
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Prepared in May

Includes short term risks-exposures and plans
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Council of ministers decree
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Budgetary relations of SOEs with central government units, i.e. capital injections,
duty loss payments, dividend payments etc.
T.R.
Prime Ministry
Undersecretariat of Treasury
Strategic Plans
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Introduced in 2003, first prepared in 2009
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In line with mid-term programs and development plans
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Under the responsibility of each government agency,
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MoD acts as a check point for harmony with budgetary and strategic objectives

Aims to
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Explicitly state a mission and vision
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Create strategic priorities and measurable targets
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Performance evaluation via predetermined indicators
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Covers a 5 year period, can be modified after 2 years of implementation
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Can be modified by a government agent in case of a change in management
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Responsibility: The minister and upper management
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Strategic document rather than a financial forecast
T.R.
Prime Ministry
Undersecretariat of Treasury
5 YEAR DEVELOPMENT PLANS
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Prepared since 1963 by Ministry of Development
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9th development plan covering 2007-2013 is in force
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Primary area of focus: Strategies for economic sectors in the long run

Reflects the economic spirit of the era, i.e. import-substition, export-oriented,
increasing competitiveness
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May contain specific targets for SOEs like privatization, restructuring
T.R.
Prime Ministry
Undersecretariat of Treasury
III. Responsibility for Achieving
Strategic Goals
T.R.
Prime Ministry
Undersecretariat of Treasury
Responsibility for Achieving Strategic Goals

Responsibilities and Limitations of the SOE Management
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SOE Management
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Limited with
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Recruitment caps
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Procurement procedures & outsourcing caps
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Investment limits and programs set by Ministry of Development
Independent in other operations
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Free in determining prices
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Intervention in prices: Duty Loss
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State covers loss and %10 forgone profit
General Manager
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Chairman
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Appointed by the nomination of line minister
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Accountable to Grand National Assembly
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No responsibility for SOE performance
T.R.
Prime Ministry
Undersecretariat of Treasury
Responsibility for Achieving Strategic Goals

Efforts for new SOE legislation
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Preparation phase
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Best international practices
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Full responsibility to management
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No interventions to management
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Independent auditors
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Performance evaluation
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Sanctions for lack of performance
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Determination of strategic objectives in coordination with SOE management
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Ending multi tasking and ambiguity in administration
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SOEs subject to commercial code
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A pool of nominees for the board from private sector and public administration
T.R.
Prime Ministry
Undersecretariat of Treasury
IV. Current Outlook and
Future Expectations
T.R.
Prime Ministry
Undersecretariat of Treasury
Current Outlook
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Problems and Opportunities
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Political intervention in pricing of energy SOEs
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High theft/loss ratio and low collection rates in energy SOEs
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Need for high infrastructure investments in the railways
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Agricultural subsidies
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High losses of SOEs which are important in local economies, inability to restructure
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High cost and rigidity of employment
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Liberalization of several markets, i.e. Postal sector, railways, energy distribution and production
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Possibilities of coordination with private sector, public-private partneship projects (Airports, railway stations)
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Outsourcing in tertiary services (cleaning, security)
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Privatization
T.R.
Prime Ministry
Undersecretariat of Treasury
Vision and Future Prospects of Treasury
in Terms of SOE Management
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
State’s new role in the economy:
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A strong regulatory and supervisory role
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No production & trade activity in the long run

Strengthened ownership of the State
Adoption of corporate government principles for public enterprises (best
practices)
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Creating more autonomous managerial environment
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Clear distinction between financial and policy objectives
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Linking appointment processes to institutional and executive performance
T.R.
Prime Ministry
Undersecretariat of Treasury