Untangling the arrears

In a special session on Monday night, the Government passed a long list of budgets for companies and autonomous regies subordinated to various ministries. It also rejected and returned an equally long list, in the attempt to limit salary growth and curb arrears. Arrears have grown into a historical problem and it is unlikely that not only the present Government, but the next one, too, will even dig to see the end. But it was again brought into focus at the demand of the IMF, which is eager to see at least an attempt to keep a check on debts between companies.

The deadline to have the two budgets rewritten is two weeks – exactly when the IMF experts are expected for the first review of economic indicators agreed upon this spring. The Government’s attempt deserves praise in its own right, but the concrete situation of each of the “debtors” is quite unclear. These are companies that differ greatly from one another, joined together on some lists.

Some of them should have never come to the Government’s attention. For instance, those with SOF as the majority shareholder. Why should the Government parse through the budget of a company with enough shareholders and, thank God, plenty of directors?

When a private shareholder has the controlling stake in several companies, each with its own manager, he imposes goals that are reflected in economic indicators and, preferably, in obtaining a profit. What does a majority shareholder do when things don’t go according to plan? He either fires the manager if he is at fault, or, if the business is doomed – whatever the reasons – he tries to sell it for any money, or closes it down altogether. In no case will he keep making losses, nor will he pay higher salaries. Is SOF any less of a majority shareholder than a private one? Not when it comes to shareholder rights. But it displays an utter lack of interest. Because it doesn’t lose any money when the factories it owns lose money.

The only loser is the budget, to which these factories grow endlessly more indebted, or suppliers, usually equally unprofitable state enterprises. Any link along this chain will candidly say at one point that it has no fault – it’s a “financial jam.” This is where the Government steps in, trying to untangle the lines.

How else but by SOF neglect came a company like Real Pleasa to submit budgets indicating that arrears would grow? The company, if memory serves after chronicling so many lists, is included on the restructuring/liquidation list that dates back to the Ciorbea Government. Today, just as three years ago, it appears on yet another list the Government is toiling over.

Other anomalies: among the budgets approved “conditionally,” with explanations required as to why they requested above 25% salary raises, are companies in the defence industry. Trade unions in this industry are screaming that they have no orders and they want their technical unemployment money. So these companies are not producing, or producing very little, let alone making a profit or improving productivity. In fact, no one is working, as long as the people are in technical unemployment. Why, then, did they ask for a raise?

The state minister Mircea Ciumara tells of even more imaginative demands; one unnamed transportation company asked for a 600% salary raise!

There are other oddities in the “conditionally approved” bucket. There are companies and institutions such as the National Lottery, the General Communications Inspectorate, the Radiocommunications, the National Forests Regie, Locato. Each has a substantial profit, or at least has everything in place to make a substantial profit – either thanks to a monopoly on some activity or the right to sell licences.

Either these companies have both profit and historic debt, more proof still that the Romanian accounting system needs a change because it works with fiction, either the Government, out of the need to reduce some of the arrears, stashed together everything it found subordinated to ministries, to squeeze another drop wherever possible. Which is not exactly in the spirit of market economy, but a kind of briganding – taking from the rich (read efficient) to patch up holes for the poor (read inefficient).

The former Conel “pulled a score,” in a way. As it undergoes a break-up and therefore it is unclear who will inherit the historic debt, one of the biggest arrears-collecting “nodes” has an excuse not to answer to the Government. Since restructuring this monopoly has always proven complex, expectably, two weeks from now it won’t have any hard data, either.

And, not least, these entities on the list are each subordinated to a ministry. How did the budgets, though flawed, arrive before the Government? Premier Isarescu is the only one who can ask this question and have his subordinates in those ministries actually answer.