| Moldova: Integrity Scorecard Report > Sub-Category: State-Owned Enterprises | ||
| Indicators | Score | |
| 64 | In law, is there an agency or equivalent mechanism overseeing state-owned companies? | 100 |
| 65 | Is the agency or equivalent mechanism overseeing state-owned companies effective? | 10 |
| 66 | Can citizens access the financial records of state-owned companies? | 5 |
Indicator and sub-Indicator Details
| 64 | In law, is there an agency or equivalent mechanism overseeing state-owned companies? | |||||||
| 64: In law, is there an agency or equivalent mechanism overseeing state-owned companies? | ||||||||
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Comments: The system of overseeing state-owned companies in Moldova is still extremely inefficient and non-transparent. As in the former USSR, the government of RM allows ministries to establish or to oversee the work of state-owned enterprises (like, state Railways - Moldova, Fintehinform, Posta Moldova - Moldova Post Office, Moldenergo, Moldtelecom). Many of them have been withdrawn form the mass privatization process for obvious reasons, while other have been re-nationalized (Farmaco) under political considerations. The government also controls important estate and land properties without providing a conclusive reporting over the destination and tax-generation mechanisms. References: Constitution of RM (1994) Law on the Government of RM
Peer Review Comments: There is no distinct agency to oversee the state-owned enterprises. In the past, the Privatization Department was in charge with doing this job. Nowadays the ministries carry out this task. For example, the Agriculture Ministry is responsible for yet existing state-owned farms and food enterprises, and the Industry Ministry looks after the industrial companies (tobacco plant Tutun CTC).
Peer Review Comments: Ministry of Economy and Trade has among its many functions one on management of public property.
Peer Review Comments: Ministry of Finance is supposed to oversee them except for banks which falls into Central Bank remit. Its true there is no Agency for the Management of SOEs, but its not true they are unsupervised.
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| 65 | Is the agency or equivalent mechanism overseeing state-owned companies effective? | |||||||
| 65a: In law, the agency or equivalent mechanism overseeing state-owned companies is protected from political interference. | ||||||||
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Comments: According to the art.2 of the Law on Entrepreneurship, the "state is a special entrepeneur, and state enterprises are ruled on the basis of a special contract agreed with the executive manager of the company". Art.20 defines what state enterprise is: "it is endowed with goods and properties by the state or by the state agency that has founded it; saying that the peculiar management of the state enteprises is regulated by a special law". According to the Law on State Enterprises, the Administrative Board of the state enterprises shall include representatives of the Ministry of Economy and Ministry of Finance, that will form the majority of the shareholders, and representatives of the working collective. Net profits of the state enterprises are distributed according to the decision of the Administrative Board, at the recommendation of the administrator. References: Law on the State Registration of Enterprises and Organizations (No.1265-XIV of 05.10.2000) Law on Entrepreneurship and Entrerprises (No.845-XII of 03.01.1992) Law on the State Enterprise - No.146-XIII of 16.06.1994
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| 65b: In practice, the agency or equivalent mechanism overseeing state-owned companies has a professional, full-time staff. | ||||||||
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Comments: Law on State Enterprises (1994) does not stipulate the functioning of a special agency to manage state enterprises, as a result the formal delegation of the ministries in the Administrative Board proves to lack efficiency and effectiveness, leaving a large space for corruption and unintended consequences. As a result, state enterprises are less profitable, while the profitable ones usually enjoy a monopol statute on key-fields for the economy. References: www.viitorul.org - www.transparency.md -
Peer Review Comments: Tthe administrators of state companies are persons close to government and, as a rule, they lack incentives for development of the trusted enterprises or know how how to run them.
Peer Review Comments: If you interpret the MoF as being the agency in question, they do have professional staff....
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| 65c: In practice, the agency or equivalent mechanism overseeing state-owned companies receives regular funding. | ||||||||
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Comments: The lack/absence of a specific agency on state enterprises had dettered the state bodies to fight against corruption. It therefore receives no funding, while important state officials have secured for themselves important 'grey money' for their nominal participation in the boards of enterprises, which have gone or are going bankrupt, because of lack of clear incentives towards competition and full reliance on governmental subsidies (i.e. cancelation of debts, cancelation of penalties). Some managers that have bankrupted or transfered assets without the approval of the administrative board are replaced and never prosecuted. References: V.Ionita On State Enterprises Managed by Ministries www.viitorul.org; Business Moldovei, Aug. 30, 2006 www.transparency.md; Center for the Analysis and Prevention of Corruption - Report www.capc.md -
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| 65d: In practice, when necessary, the agency or equivalent mechanism overseeing state-owned companies independently initiates investigations. | ||||||||
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Comments: There have been no investigations. When cases of corruption are investigated, the initiative belongs to the Auditing Court or to the Center fighting Corruption and Organized Crime. References: www.capc.md; Auditing Court of Moldova www.ccrm.md; Center fighting Organized Crime and Corruption www.cccec.gov.md
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| 65e: In practice, when necessary, the agency or equivalent mechanism overseeing state-owned companies imposes penalties on offenders. | ||||||||
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Comments: Penalties are imposed usually by the Tax Inspectorate. Serious economic crimes are investigated by the General Prosecution Office and the Center fighting Organized Crime and Corruption in Moldova. References: www.transparency.md Law on State Enterprises (No.146-XIII of 16.06.1994)
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| 66 | Can citizens access the financial records of state-owned companies? | |||||||
| 66a: In law, citizens can access the financial records of state-owned companies. | ||||||||
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Comments: Citizens cannot access the financial records of state-owned companies. References: Law on State Enterprises (1994)
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| 66b: In practice, the financial records of state-owned companies are regularly updated. | ||||||||
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Comments: By legislation, executive managers of the state enterprises are obliged to present regular reports on the financial situation of the enterprise only to the founders (art.7), meaning state representatives, therefore no public records are provided to those who are not shareholders. References: Law on State Enterprises (1994)
Peer Review Comments: The question doesnt ask about information to the public. SOEs do provide accounts, though only to their principals (as previously defined). These records may be of questionable value, but thats another issue.
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| 66c: In practice, the financial records of state-owned companies are audited according to international accounting standards. | ||||||||
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Comments: Only the Auditing Court may provide reports on the actual situation of the state enterprises and budgetary organizations, and their regular reports tell the public about considerable and systematic violations of the financial standards at these enterprises. The government provides facilitated legal regime to these enterprises, and sometimes they us the public funds inappropriately to compensate their losses (www.timpul.md - July 12, 2006, No.449 - Interprinderi agricole de stat, creditate din contul pensionarilor). References: Center fighting Economic Crimes and Corruption National Report regarding the progresses and obstacles registered in the process of the national strategy for fighting and preventing corruption (prepared within the MOLICO Project against Corruption, Money Laundering and Terrorism Financing in Moldova) www.scers.md
Peer Review Comments: Modovan auditng practices are a far cry from what we understand to be international auditing practies...
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| 66d: In practice, citizens can access the financial records of state-owned companies within a reasonable time period. | ||||||||
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Comments: State enterprises are not listed among the entities primarily responsible for the implementation of the Law on Access to Information (2000). Accordingly, citizens may access only the information which is reported by mass media, when they can get it through private investigations. References: Law on the Access to Information (No.982-XIV of 11.05.2000) Law on State Enterprises (1994)
Peer Review Comments: Even if information is requested based on Law of Access to Information, the answer will be that information requested represents "commercial interest".
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| 66e: In practice, citizens can access the financial records of state-owned companies at a reasonable cost. | ||||||||
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Comments: References: The answer is no, and there is no such practice that state-owned enterprises would provide regular reports to the public. For instance, although all public entities and state enterprises have been insistently pressed to become more open, transparent and accountable to the public, they have not yet decided to post the financial records on the website of the railway company (Calea Ferata din Moldova). The same can be stated about the Air-Moldova and other large state companies.
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