THURSDAY, March 28, 2024
nationthailand

State-owned enterprises need further reforms, experts say

State-owned enterprises need further reforms, experts say

State-owned enterprises (SOEs) need to be reoriented toward the consumer by privatisation, economists said.

U Myint, chief of the President's Economic Advisory Unit, said privatisation would force public enterprises to produce goods and services in line with consumer demands and preferences.

“State-owned enterprises should not be producer-oriented. Instead, they should be consumer-oriented. Privatisation will make public enterprises function in a more business-like manner,” he said.

U Myint added that privatisation is expected to bring such promises as promoting economic efficiency, providing opportunities to increase competition, increasing government revenues, reducing budget deficits, reducing government interference in the economy, promoting greater share ownership, assisting in the establishment of a capital market, and attracting more aid packages from international donors.

“Nowadays, many people are worried about persistent losses and operational deficits of state-run firms. As their losses lead to huge budget deficits, the government needs to overcome the shortcomings of SOEs as soon as possible. It is important to raise the operational efficiency of public enterprises through better management and control,” he said.

According to U Myint, the government needs to emphasise the performance of the public enterprises sector. Reforms should be aimed at raising efficiency and productivity. The increasing involvement of the government in commerce, industry and finance has tended to introduce a multiplicity of objectives, such as obtaining a better deal for indigenous people and raising employment, into the running of what are essentially commercial and business operations.

According to U Myint, measures to improve SOE performance include granting greater autonomy and decision-making authority to enterprises by relaxing the control of government ministries, making enterprises more responsible for their own profits and losses, giving managers greater discretionary powers in such matters as recruitment and dismissal and providing material incentives in the form of bonuses to increase productivity.

The presidential adviser recommended privatisation of SOEs but also admitted that carrying out a privatisation project is always hard.

“Things will go wrong as it happens in every country. What is important is to get more things right than wrong,” he said.

“I think many people in this country have an uneasy feeling that it will lead to cronies running away with the country’s family jewels. People may also worry about the spectacular failures that privatisation has unleashed in some countries.”

According to the economist, a public monopoly is replaced by a private monopoly when a public enterprise operating under monopolistic conditions is transferred to the private sector. Under such circumstances, the government must continue to exercise some control over the privatised firm in order to protect consumer interests. He also underscored the importance of transparency in the privatisation process.

“The result of privatisation – whether it is good or bad – will depend on what firm, service or function is privatised, who is in charge of privatisation, what form it takes and how it is done. Sequencing is also crucial [in determining], for example, what measures must accompany privatisation to be successful,” he said.

Usman Ali Khilji, a trade policy analyst at the World Trade Organisation’s trade policies review division, also called for further liberalisation of SOEs.

“Almost all SEEs [State-owned economic enterprises] are making losses. Questions were raised about SEE reform. WTO members have urged [the] Myanmar government to lay more emphasis on the privatisation of state-run firms,” said Khilji.

He added that according to the findings of the WTO, state-owned enterprises spend 75 per cent of the total government budget, and their annual losses are estimated amount to about 5 per cent of GDP [gross domestic product]. According to Khilji, the barriers for further development of state-run firms include lack of a healthy financial system, low technology and a lack of market access and skilled labour.

Min Min, deputy director-general of the commerce ministry’s directorate of trade, said the government would take privatisation into serious consideration at the macro level.

“We have been implementing the privatisation process since the term of the previous government. We have been changing our policy. For example, at present, the government does not allocate budgets to run state-owned enterprises. Instead, it provides loans for SOEs,” he said.

“In the past, SOEs were run by on the government budget, and the relevant ministries were not responsible for the issue of whether the enterprises were making profits or not. Nowadays, as SOEs run on government loans, all the concerned ministries are responsible for not making huge losses. So they focus on reducing unnecessary costs much more than ever before,” Min Min added.

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