EMIL BOC THE CREATIVE PRIME MINISTER HAS FINALLY REMEMBERED ABOUT THE COMPANIES OWNED BY THE STATE The Prime Minister finally wised up

The excitement of president Traian Băsescu during the meeting with the IMF mission, which came to the Cotroceni palace on Sunday, was due to a mysterious set of measures concocted by the Boc government in the nick of time, which the presidency thinks could help secure less harsh terms on the agreement with the international financial institutions.

Băsescu was so happy, that he praised the PM, saying that the proposal to soften the terms of the agreement stems from the "government"s creativity".

The veil of secrecy was lifted yesterday, when Emil Boc said on the public radio station, that the Government would continue the privatization process of CFR Marfă, would restructure unprofitable companies and would sell the minority stakes it holds in some companies on the stock exchange, while still keeping its majority stake in major companies such as Transgaz.

It is the first time he says it out loud (he mentioned something about asking the ministers in his cabinet to draft some plans for restructuring the autonomous state owned enterprises).

The memorable statement noted above should be engraved in golden letters: November First 2010.

Six months ago, on May 18th, 2010, when the wage and pension cuts were first brought up, "BURSA" published the article "The national impotence", of which we present the following excerpt:

"The state owns a large number of national companies and autonomous enterprises (not to mention the fact that the state owns majority stakes or controlling interests in numerous corporations).

[...]

I have yet to hear from the government make a commitment to improve the profitability of its monopolies.

It would be so easy for the government to set financial performance criteria for its monopolies!

All it would need to do would be to simply ask the heads of the various state owned autonomous companies (which get paid tens of thousands of Euros in wages) to present the measures they would take to meet their profit targets and to check their results once a month, and then they would be legally entitled to fire the managers that didn"t meet their objectives. In certain cases, the state could impose a private manager which would be required to provide performance guarantees - risk free, everybody wins.

As if it were a fatality, everyone settles for the fact that there isn"t enough money.

Without any dignity whatsoever, both parties fight over crumbs - "we"re going to cut wages and pensions"; "no you won"t, freeze wages and raise the VAT [...] no one has drawn up a general business plan - it"s called "strategy" - nor business plans for each sector and specific measures for each monopoly - they"re called tactics".

Even as we cut 15% off some poor sap"s 600 RON pension, the debts of autonomous companies and national companies continue to grow, while they keep paying tens of thousands of Euros to their bosses, and their electricians three times more than their private sector counterparts, while they work five times less and do a job ten times worse.

Nobody talks about work. They all talk about money."

The article ended with a P.S., in which I explained why this method for making money was not taken into account:

"I know why none of the political parties will do anything to whip the national companies and the autonomous enterprises into shape: those positions at the top of the various national companies and autonomous enterprises are part of the perks of the party that won the elections."

But I must confess that the articles came after an older, face-to-face discussion, with top government officials, where the journalists of "BURSA" proposed the restructuring of state-owned companies.

Unsuccessfully.

Quite the contrary - the answer was a resounding and stern "no", without any justification.

That is why now, when PM Emil Boc is apparently proposing the same solution, we realizes that we can"t claim ownership of that idea (which, as a matter of fact is obvious to any reasonable person), because it can"t be the same. The outcome of that idea depends on its implementation (a wedding with no band is one thing, a wedding without " hip-hop" music is another).

What"s certain is that Emil Boc got this idea on his own, but not thanks to common sense.

Which explains the praise of the president -truly Boc must be creative to have come up with the idea and voiced it out loud.

After, it"s better too late than never ...

• The IMF and the government have different ideas on solving companies with problems

The IMF and the government have different conceptions on solving the issue of state owned companies. PM Emil Boc speaks about privatizations (including the sale of stakes in various companies on the stock exchange) and the restructuring of unprofitable companies to turn them around. Also, the state will keep its majority stakes in strong companies that have a profit.

In turn, the IMF speaks about a radical solution for troubled companies. Jeffrey Franks, the head of the IMF mission for Romania, yesterday said that state owned companies which the IMF had been monitoring have seen their losses increase, and recommends their privatization or liquidation. He also said that the aggregated arrears of the ten largest unprofitable state owned companies amount to 7 billion lei, including duties to the state budget, whereas arrears to the consolidated state budget exceed 1 billion lei. (Ana Zidaru)

Many financial analysts consider that these troubled companies can not be successfully privatized without undergoing a major reorganization process, which would turn them around and make them more attractive. Also, the circumstances are not adequate for the sale of majority stakes, because strategic investors are cautious in their acquisitions, and the financial markets do not have good rates when it comes to lending for such purposes.

• • Could the National Coal Company and Termoelectrica be liquidated?

If we were to consider the brutal solution of the IMF, liquidation would be the best alternative for the champions of arrears to the state, the National Coal Company (CNH) and Termoelectrica. In fact, the Government is reviewing several solutions, which depend on the restructuring of our energy system through the creation of two major energy companies.

One of the solutions is precisely the liquidation of the CNH, after the company will be stripped of its viable assets, which would be integrated into Hidroenergetica, together with Hidroelectrica and the thermo-electric power plants of Deva, Paroşeni and Electrocentrale Bucureşti. The plan of the authorities would be to "kill" part of the debts of the CNH, together with the company itself, which would only be left with three mines. The latter will be shutdown over the course of 3-4 years. The remaining debts of the four viable mines would go to Hidroenergetica, with the hope of wiping them somehow, someday.

Termoelectrica"s viable assets will also be "stripped", to go bankrupt, as well as wiping some of its debts.

Electrocentrale Bucureşti (ELCEN) can not be declared bankrupt for two reasons: it provides heat to citizens of Bucharest and Constanţa; it has co-generation plants which use gas, which could become very profitable on the market for the balancing of the national energy system. The debts of ELCEN are the biggest problem for the future Hidroenergetica, because the company has several billion lei to recover from RADET Bucharest and RADET Constanţa. ELCEN is being monitored by the IMF due to accruing debts towards its suppliers due to its uncollected claims on the two divisions of the RADET.

Sources from inside the energy system claim that the Government is preparing a compensation of these debts, by directing the outstanding fuel subsidies (money which would go to the divisions of the RADET may only be used for the payments of the debts towards the ELCEN, which in turn must use this money to pay the outstanding invoices to its suppliers). (A.T.)

• • CFR Călători is not for sale

The officials of CFR Călători recently said that "this possibility was never discussed before, nor is it being discussed now (ed. note. the privatization of the company)".

The statement comes as several union leaders said that the government plans to do a "disguised" privatization of the company. The unionists explained this aspect through the fact that the plans to reorganize the company (which is being monitored by the IMF), which include layoffs and putting its employees in technical unemployment for months on end, yielded no results. At the end of September, CFR had 76.6 million lei in arrears to the consolidated budget, according to data of the ANAF.

• • CFR Marfă: Disagreements on the value of the company

Official sources recently said for "BURSA", that the government wanted to get 1 billion Euros from the sale of CFR Marfă. The same sources also said that a more fair value for the transaction would be around 400 million Euros. The names of potential buyers for CFR include The Romanian Railway Group and Austrian company OBB (the Austrian Railway Company). At the end of September 2010, the arrears of CFR Marfă to the consolidated general budget amounted to 356.3 million lei, according to data from the ANAF.

• • Metrorex owes money to its suppliers

Metrorex is an autonomous state owned company which is monitored by the IMF because of its debts towards its suppliers. According to manager Gheorghe Udrişte, its aggregated debts towards its suppliers - namely Alstom- for the years 2009 and 2010, amount to 200 million lei. That amount should have come from subsidies which would have allowed keeping the contract with Alstom going. (A.T.)

• • Ever increasing debts, in spite of the IMF monitoring

The debts of some of the state-owned companies monitored by the IMF continued to grow during the monitoring. One such example is CFR Marfă, a company whose arrears to the state budget doubled this year, from 64.6 million lei at the end of 2009, to 135.7 million lei at the end of September 2010. Another such example is "Electrificare CFR", a company which has seen its debts increase during the same period, from 162 million lei to 209.9 million lei. (ed. note:. -the evolution of the debts of the other companies monitored by the IMF is presented in the chart below).

• • Monitoring and debts

The IMF is monitoring ten state owned companies: The National Railway Transport Company CFR, The National Transport Company CFR Călători, The National Coal Company, Termoelectrica, The National Highway and Road Company, Metrorex, CFR Marfă, Electrocentrale Bucureşti, Societatea Comercială Electrificare CFR ( the CFR Electrification Company). Eight out of the ten companies (ed. note.: Metrorex and Electrocentrale Bucureşti have no arrears to the state), had accrued 5.85 billion lei to the consolidate state budget, on September 30th, 2010.