Kyrgyzstan to sell or liquidate unprofitable state-owned enterprises

kyrgyz_globe_map-642

BISHKEK (TCA) — According to official data, 1,130 state-owned enterprises are registered in Kyrgyzstan and 900 of them are idle, 166 regularly receive subsidies from the state, and only 33 enterprises are operating efficiently.

 

In 2016, revenues of the state-owned enterprises (SOEs) totaled 42.8 billion soms and expenditures – 41.9 billion, and the state budget only received 364 million soms from them.

Over the past five years, a significant drop in SOEs net profit has been recorded: since 2012, it has decreased by 1.38 billion soms. Low profitability is due to the fact that SOEs incur large expenses, both operational and non-operational.

SOE heads inefficiently use the state property, the Government said. Financial performance of several SOEs did not exceed 100 thousand soms in 2016. At the same time, these enterprises have buildings and land that could be effectively used to improve profitability.

For instance, the Semetey hotel located in the center of Bishkek had a 53.5 thousand soms profit in 2016 while its payroll amounted to 8.2 million soms, 153-fold more than profit. The Chygysh Bus Station SE had a 31.7 thousand soms net profit and the wage fund of 4.5 million soms last year, 141-fold more than profit, State Property Management Fund Chairman Bolsunbek Kazakov told at a press conference in Bishkek.

The revenues of state enterprises were spent to cover administrative expenses and pay wages, and their staff is unreasonably increased, the Government said.

Kyrgyz Temir Jolu (Kyrgyz Railways State Company), InfoCom, Air Navigation, and Kyrgyzkomur (Coal Mining State Company) are among profitable enterprises that brought revenues to the state budget.

Prime Minister of Kyrgyzstan Sooronbai Jeenbekov ordered the State Property Management Fund (SPMF) to optimize the work of state-owned enterprises. The need for their reorganization has been discussed for a long time but there are no results so far. Meanwhile they were created to be profitable. Unfortunately, the state-owned enterprises were not able to fit into the new economic conditions, and cannot cope with the tasks set before them, while similar enterprises in the private sector have much larger profit, Jeenbekov said.

The analysis showed that the number of enterprises with state participation should be reduced. The Government has developed a concept for the optimization of state enterprises, which will be implemented in several stages. At the first stage, 166 companies will be transferred into the category of state institutions, since they are financed from the state budget, and others will be strengthened and expanded. Government has decided to liquidate 114 SOEs and reorganize 63 ones.

According to Jeenbekov, many state enterprises continue to be an instrument of organizing corruption or lobbying schemes. Despite the fact that the main goal of a state-owned enterprise is to bring profit, there are enterprises that have been annually subsidized from the state budget in violation of the country’s legislation.
Joint-stock companies that operate inefficiently or companies with the state share in their authorized capital being less than a controlling stake will be put up for auction. Now the Government is drafting a list of such enterprises.

People working in such enterprises are concerned about their employment. According to the Prime Minister, all workers will keep their jobs in the nearest future, but they should understand that a reduction of the staff cannot be avoided.

The State Property Management Fund will hold meetings with business associations to discuss the further operation of state enterprises. Particular attention will be paid to enterprises that fall under the reorganization, optimization or liquidation. To avoid corruption, the Government decided that the Parliament should consider all procedures of the SOEs reorganization.

The SOEs will cease to exist as legal entities, and their property will be transferred either for long-term lease or be subject to privatization or sale through auctions.

In the near future, the Kyrgyzpochtasy (Kyrgyz Postal State Company) will be incorporated. The Kyrgyz Temir Jolu (railway company) will continue operating in the current state ownership but the issue of its further effectiveness will be considered separately, the Prime Minister said. In particular, all non-core objects will be removed from its structure. Only the passenger and cargo transportation, as well as the maintenance and repair of cars, diesel locomotives and railway tracks will remain in the competence of Kyrgyz Temir Jolu.

The Government is also considering the corporatization of Kyrgyz Komur coal mine SE.

The Government instructed SOEs heads to improve the management, optimize the staff and reduce operating and non-operating expenses.

An interdepartmental commission has developed criteria for the economic feasibility of functioning of state-owned enterprises. In accordance with the approved criteria, a list of SOEs will be prepared for further corporatization, liquidation, and privatization.

To avoid corruption, the Government decided to establish an electronic trading platform, according to which the sale and lease of state property will be carried out not by the State Property Management Fund, but through on-line trading platform.

The previous attempts to optimize the public property sector were not successful, and the Government now tries to introduce new methods of state property management.