Parliament to send state-owned firms back in time

Through a movement that proves the lack of economic education, but also a repetition of the history of the last 30 years, the Romanian Parliament has thrown state-owned companies into the mists of the last century. The opening by listing the shares on the capital market of companies such as Hidroelectrica means transparency, the disclosure of the administrative act, which is subject to criticism from new shareholders – and Hidroelectrica is closely watched by large international investment funds, with management, governance and investment standards that are much more higher than the local ones.

The control of state-owned companies thus falls to the winner of the elections, a fact on which the left-wing coalition relies – let’s not forget that 2020 is an election year. Temporary management in the case of companies is only a proof of political influence within large firms. Temporary management is part of a broader discretionary policy, which puts in the hands of the winners of the elections assets of billions of euros, companies’ reserve funds and dividends that can cover permanent budget holes.

Moreover, yesterday’s vote does not take into account the requirements of the European Union, international financial bodies or even their political platform – the program of the left, which for decades included the privatization of state-owned companies, probably only for blinding the EU’s representatives.

In addition to the fact that yesterday’s vote undermines the development of the national economy and should be treated as such, it demonstrates that the problems of communism has not yet disappeared and that group interests come first. Not infrequently, we came across political appointments and groups of interest in state companies and institutions, games with contracts grossly awarded to acolytes, financial holes and even cosmeticized fraud.

Yesterday’s vote was a political one, anti-PNL, supported, unfortunately, by economists from the left spectrum.

One of the ways of financing companies, the capital market, may be forced to give up the banal capital increases, which can represent for listed companies that have as shareholder also the Romanian state a mouthful of oxygen in the period of deep crisis we are going through (it remains to be seen what the application norms will look like).

The listing of Hidroelectrica is not, therefore, the only stake, but it is the biggest. The listing comes with its advantages for the capital market, which meets capitalization standards that would allow it access to much larger international investment funds, by moving to the status of emerging market, from the current of frontier market, in the acception of all international arbitrators (both FTSE and MSCI).

Since the arrival of Ludwik Sobolewski at the helm of the capital market, Romania has held multiple international delegations and meetings with major investors in London and New York, who considered the local market uninteresting, lacking capitalization and too small to be worth an investment. Yesterday’s vote maintains this view for another two years and thwarts the introduction of corporate governance in state-owned companies. In other words, it threw them back in the ’90s.


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Bogdan Tudorache

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