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Vulnerabilities in the field of privatization and management of public assets, discussed during a round table

  • 22.12.2021
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The main purpose of privatizing public assets is to restructure the national economy and increase its competitiveness by attracting private investment. A legal and efficient privatization exercise could have a positive impact on some sectors of the national economy, as well as increase revenue to the state and local budgets.

From year to year, the Court of Accounts of the Republic of Moldova (CoARM) draws attention to the risks posed by multiple problems, irregularities and systemic dysfunctions, in areas of strategic importance, which, in our view, require urgent attention and involvement. Despite the observations and recommendations reiterated by the Court of Accounts, the measures taken by the responsible authorities at both central and local level do not ensure the management of assets in the spirit of the principles of legality and efficiency, although there is a sufficiently good regulatory framework. regulated, the risk of alienation and loss of property is still persistent and remains high.

According to the data from the Register of Public Patrimony, kept by the Public Property Agency, as of January 1, 2021, the balance sheet value of the public patrimony of the Republic of Moldova amounted to 121.3 billion lei.

In 2020, the annual balance of the public patrimony increased, compared to the previous period, by 23.3 billion lei, a situation due to the actions of improving the related legal framework, but also to the exhaustive inventory and proper registration of property rights by the responsible entities, including as a result of the implementation of the Court of Accounts' audit recommendations.

According to the Parliament Decision no.83 from 19.07.2019 “On the request for the audit of the denationalization of public property and privatization for the years 2013-2019”, the Court of Accounts performed six audits on the compliance of the privatization of the state public patrimony during 2013-2019. The generalization of the audit findings regarding the compliance of the privatization of the public patrimony attests that, mainly, the assets and objectives of public property were privatized in the conditions of a non-strategic and defective management, affected by noncompliance, risks of fraud, assisted by an inconsistent and deficient normative framework.

The audit verifications attest that only the gaps and violations in which it was possible to quantify the value impact deprived the budget of additional revenues amounting to 371.2 million lei, which constitutes 27.1% of the value of the alienated patrimony in the period 2013-2019 and subject to audit verification (1,366.5 million lei).

Generalizing the findings and conclusions set out in the audit reports related to the subject matter, the main systemic irregularities and vulnerabilities were identified, the elimination and remediation of which are a starting point in streamlining and enhancing the quality of strategic and operational management in the field of privatization of public assets, as well as in maximizing the benefits of the state obtained after its denationalization.

The findings of the audits were presented in the Analytical Synthesis of the audit results on the field of privatization of public assets during the years 2013-2019, a topic that was also one of the main highlights addressed in the Annual Report of the CoARM.

In this context, on December 22, the CoARM organized a round table "The process of privatization of public assets, in the eyes of the Court of Accounts." The public event provided a platform for discussions, bringing together representatives of public entities: the Ministry of Finance, the Ministry of Economy and Infrastructure, the Ministry of Foreign Affairs and European Integration, the Agency for Land Relations and Cadaster, the Public Property Agency and the civil society.

The first important topic highlighted in the discussions is the lack of a national privatization strategy, a document that would define the priorities, modalities and periods of privatization, correlated with the strategic development visions of the branches and sectors of the national economy. The elaboration of strategic documents related to the field of privatization and their public debates would ensure transparency in the privatization process, would bring more information to the public about the purpose and impact of privatization and would help increase the company's confidence in this process. Given the importance of the above, the Court of Accounts made recommendations to the Executive in order to develop a policy document in the field of privatization of public assets.

The audits carried out by the CoARM highlighted the need and importance of developing annual privatization programs, as well as the need to develop and approve a methodology for determining how to privatize state public assets.

An important stage of the privatization process, identified by the audit as one of the most vulnerable, is the evaluation of the privatized public patrimony, in order to determine the market price. This process is affected by systemic non-compliances, including reasonable suspicions of fraud.

The Court of Accounts reported on the existence of gaps and gaps in the regulatory framework related to the privatization of some state assets that deprived the state budget of significant revenues. Only the deficiencies of the normative framework, cumulated with the results of uncertain valuations of the privatized uninhabitable rooms, conditioned the alienation of the respective goods at significantly diminished prices compared to the market ones, by which were lost revenues to the state budget, estimated by audit, in about 256.9 million lei and at LPA of at least 61 million lei.

Another important issue focused on the integrity of the public patrimony, discussed at the round table, refers to the disastrous situation regarding the management of the public patrimony, located abroad.

In the annual audits on the financial statements of the ministries, the CoARM included a separate objective on assessing the state of state assets abroad. As a result, an alarming situation was found regarding the management by state institutions of public property located outside the Republic of Moldova (Ukraine, Russian Federation). The responsible authorities do not ensure the management of assets in the spirit of the principles of legality and efficiency and do not have accurate and up-to-date information on the status and total value of assets abroad.

The most important irregularities, in context, relate to the inefficient management, materialized in the deplorable condition of the buildings and the uncertain situation regarding the property right over the buildings, some being abusively occupied or being in litigation. The extent of the process of ruining public property outside the country is demonstrated by unauthorized demolition and loss of assets, as well as many other examples of inefficient management.

We note that the round table provided participants with the opportunity to discuss systemic vulnerabilities and to examine solutions to problems identified by the Court of Accounts.

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