The latest figures publicly presented by Prime Minister Vasile Tofan reveal just how serious the situation surrounding the management of state-owned enterprises has become. While state-owned companies manage assets worth approximately 38 billion lei, the dividends generated over the past year amounted to just 689 million lei. The Prime Minister pointed out that the return on these assets barely reaches 1.8%, and if three major companies are excluded, it drops to just 0.7%.

Furthermore, data from a parliamentary commission of inquiry, which examined the activities of state-owned enterprises over several months, show that two-thirds of these enterprises are effectively beyond the state’s control in its capacity as founder. Thus, while 515 state-owned enterprises are currently operating in the Republic of Moldova, only around 170 fall under the management of the Public Property Agency. In an editorial on this subject published two months ago, I drew attention to the fact that the situation regarding state-owned land is even more serious. Today, there is still no complete clarity about how much land the state owns, how much of it is agricultural land, forest land, or land designated for construction, under what conditions it is managed, and so on.

All of this highlights a sad truth: the state lacks the capacity to manage its property efficiently, and the time has come to make fundamental decisions. Until recently, it was believed that it would be sufficient for the state to decide to put most enterprises up for privatization, retaining ownership only of those considered strategic. Now, however, the situation has become more complicated. Recent developments show that there is little interest in the assets offered for privatization. And this is understandable. On the one hand, the procedures involved in the privatization process are quite complicated, while on the other, the investment climate in the Republic of Moldova is not particularly attractive. The security risks and instability associated with a war taking place on Moldova’s borders only add to this difficult picture.

The Government is aware that the procedures involved in the privatization process are complicated and has already announced its intention to simplify them. To this end, participation guarantees will be reduced, bank guarantees will be accepted, and the deadline for signing contracts will be extended. All these measures are welcome, but they are not sufficient to address the underlying problem. A much more comprehensive approach is needed.

First, the state must make a fundamental decision to withdraw from the economic activities in which it participates through state-owned companies. The role of the state should be that of a referee, not an active player. I repeat: only enterprises of strategic importance should remain in state ownership.

Second, as I stated in my editorial two months ago, a comprehensive assessment must be carried out of state-owned enterprises and state-owned land. This must also include restoring the state’s control, in its capacity as founder, over more than 300 enterprises.

Third, inactive state-owned enterprises must be liquidated.

Fourth, all active enterprises, with the exception of strategic ones, must be thoroughly prepared for privatization.

Fifth, a large-scale information campaign is needed to familiarize potential investors with all the opportunities that the major privatization process expected to take place in the Republic of Moldova will offer.

If this large-scale privatization process proves successful, significant investments will flow into the Republic of Moldova, the operations of many enterprises will be revitalized, and the state will obtain financial resources that will allow it not only to finance the budget deficit (which has reached alarming proportions), but also to repay virtually the entire public debt.

Mircea Baciu, entrepreneur from the Republic of Moldova