BACKGROUND

Despite the waves of privatization in the eighties and nineties, public enterprises remain important producer of goods and services worldwide and recently even became one of the key drivers of emerging-market economies’ growth. Numerous examples of public sector enterprises (PSEs) in previous years which successfully operates in competitive global markets clearly illustrate that public sector enterprises can match the performance of their private-owned counterparties if they are properly governed. However, in many countries PSEs still suffer from the inappropriate governance which results in loss-making, non-transparent and inefficient PSE sector.

Hence, there is general agreement between the policymakers and all other stakeholders that reforms to create market and profit oriented PSE sector should be implemented. During the last decade, reform of the public sector enterprises toward improvement of their performances was subject of wide discussions, as the PSEs face specific governance issues that make them more difficult to reform than the private sector, i.e. Wong (2005) addressed several unique difficulties in this process including pursuing both commercial and non-commercial objectives, self-interested behaviour by managers and politicians or bureaucrats, non-market mechanism and low level of disclosure.

Unlike private enterprises, which primary objective is maximization of profit and economic value added, PSEs might pursue both commercial and non-commercial and thus possibly conflicting objectives if the governing entities have different aims for one public enterprise. This issue could be addressed to the organization of the state ownership function, or in other words to the separation between management and ownership which remain one of the key questions regarding debate on PSE efficient performing. The ownership function of state could be generally exercised in the centralized, decentralized, or dual manner (World Bank 2006). In the centralized form, there is one governmental authority, such as a ministry or holding company, responsible for the government’s shareholdings in all PSEs. In the decentralized model, different enterprises are overseen by different ministries, and PSEs may also have widely varying requirements and relationships with other parts of the administration. In the dual form, one single governmental entity performs certain ownership functions for all PSEs (varying from being close to that of the centralized case to very limited control over PSEs), but other functions are performed by different entities for different SOEs.

Model of decentralized or dual ownership has been often criticized due to dual role of the ministries, which both determine the industrial policy and evaluate performance of PSE and the centralization of ownership function was strongly advocated in recent years. However, diversity in management and ownership models among the countries worldwide remains; as each country has developed its own model of ownership exercising, searching for the role model of effective state owned ownership, which will assure both achievements of commercial and policy objectives, is still going on.

One of the most significant results in the process of the restructuring of PSEs sector was Guidelines for the Corporate Governance of the State-Owned Enterprises presented by the Organization for the Economic Development and Cooperation (OECD) which among the other issues also recommend centralization of the ownership function. Although guidelines have been very well received and recognized not only by OECD member states but also by other countries, high corporate governance standards recommended together with specific historical, social and political context of the national economic environment brings the difficulties to their faster implementation.

In order to give contribution to the further discussions on reforms on public sector, ICPE initiates this meeting of the state ownership authorities. As the recent experiences with EU debt crises shows that policy “one-size-fits-all” might not be the best solution even in the countries with similar political and economic systems, we also believed that beyond some general recommendations on PSEs governance which could not be doubt, successful implementation of reforms requires taking into account national specifics of each country. Hence we consider that discussion and exchange of experiences is crucial for the faster improvement in this field.

In addition to the standard debates on organization of the ownership function, ICPE also recognized that in many countries, due to the complex political situation, political commitment to the implementation of the reforms could be key factor of successfully implemented reforms. In this regard, we considered that public pressure on the governance authorities could be an appropriate tool to enhance efficiency of the exercising of the state ownership rights and that public-private dialogue in this context is also important topic to discuss.

Participants on the Meeting will be representatives from ministries, governmental organizations and agencies responsible for governance of public or state-owned enterprises and representatives of multilateral international organizations. Participants are expected to present their countries' systems of the organisation of the state ownership function. Each participant would have 30 minutes to cover following issues on PSEs and organization of the state ownership function within the country:

• Who is responsible for the determination of strategic goals of PSE?

• How is strategic planning  coordinated between enterprises and ownership policy makers?

• How is balance between commercial and non-commercial objectives achieved?

• Who is responsible for achieving of PSE goals?

• Who is responsible for privatization strategy and its implementation?

• How private-public dialogue is involved in PSE management systems?

• Which modalities are used for representing the state interests in the PSE board of directors?

• How is the responsibility for governance of PSE distributed and coordinated among state authorities?

In addition to central topic, short history of the PSE sector and facts and figures on current size and developments of PSEs, as well as further steps on PSEs governance improvement would be appreciated.

After presentations, participants will have opportunity to discuss and to exchange best practices and experiences. The proceedings and conclusion will be published in ICPE Public Enterprise Quarterly Journal. Working language is English. We would highly appreciate to receive written materials or power point presentation prior to the Meeting.

For confirmation, questions and additional information please contact Mr. Drasko Nikolic.

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Tel.: +386 1 568 23 31

Fax: +386 1 568 27 75