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Public Enterprises Improve Performance: PS

Last year the Government has so far received a record breaking $78.8 million as dividends from state owned enterprises as compared to about $4.2 million in 2007. This was highlighted
25 Jan 2018 10:04
Public Enterprises Improve Performance: PS
From left: Ministry of Public Enterprise director Laisa Bolalevu , Permanent Secretary Jitendra Singh and Director Sujeet Chand at the Parliamentary submission on January 24, 2018. Photo: Vilimoni Vaganalau

Last year the Government has so far received a record breaking $78.8 million as dividends from state owned enterprises as compared to about $4.2 million in 2007.

This was highlighted by Permanent Secretary for Public Enterprises Jitendra Singh during their submission on the follow up audit on monitoring of Government entities to the Parliamentary Public Accounts Committee yesterday.

Mr Singh said despite the individual enterprise setbacks in the previous years, there was an overall improvement in 2014 to 2016 period.

“The improvements in the performances of the state owned enterprises are attributed to the appointment of qualified and skilled boards of directors.

“They have been able to provide the necessary guidance to state owned enterprises to be commercially focused, raise level of corporate governance and improve productivity and operational efficiency.

“Most of our state owned enterprises are undertaking capital investments in order to modernise their operations to increase revenue and capacity,” he said.

Mr Singh added some of their state owned enterprises were not meeting the 10 per cent return of shareholders fund, however when they do make profits, they declare their 50 per cent dividend as per the ministry’s corporate government policy.

(Each state owned enterprise should give at least 50 per cent of the net profit as dividends while the measure of performance is 10 per cent after tax on return of shareholders fund.)

He said that entities usually justify the percentage amount they can give or whether they need to do some capital investment in order to modernise their operations to increase revenue and capacity. 

“More entities are now earning more than 10 per cent return on equity.”

However, Mr Singh highlighted that the Ministry of Public Enterprise is preparing a revised dividend policy which will be finalised once the revised Public Enterprise Bill is approved.

The 10 per cent return on equity is an expectation from all the state owned enterprises which may not be the best and fair option considering the industry in which they operate.

Some operates in extremely competitive environment especially those in the agro industries while some are performing exceptionally well, he said. 

“The government can discuss with the boards on what would be the fair dividend payment for future reinvestment in the state owned enterprise.”

Overall, Mr Singh said the consolidated performance of the state owned enterprises have generally improved.

Other points discussed:

Review of the public enterprise act 1996.

The committee questioned the public enterprise on the updated review of the current public enterprise act.

Mr Singh said the final draft of the new bill was almost ready and should be presented in the cabinet and parliament when it’s finalised. 

“It’s in its final stages.”

Question by the Committee

Does the Ministry of Public Enterprises needs to strengthen its role in monitoring the public enterprises non commercial obligations? 

This by coordinating with line ministries and making arrangements for monitory systems?

Response:

Mr Singh said: “We will be working more closely with the line ministries to agree on key non commercial obligations by the state owned enterprises and then incorporate them as part of the monitoring frame work.”

He added that it was expected that the delivery of these key performance indicators on non commercial obligations would also be linked to the release of the funds to these state owned enterprises.

“So for the commercial obligations, we would definitely expect them to make positive returns.

“Right now we don’t have a framework in place but we will be working towards that in strengthening the monitoring of the state own enterprises.

On the compliance arrangements and legislated requirements:

Mr Singh said most of the entities have not been submitting the required documents to the ministry for monitoring purposes.

“There has been an improvement on the compliance and from 2015 we had only 6 compliant state owner enterprises that were submitting the reports to us at a compliance rate of 29 per cent.

“But this has gradually increase to 14 in 2016 with the compliance rate of 67 per cent.

“In 2017 it has reached 81 per cent so there has been a general improvement in the compliance with these state own enterprises reporting on their obligations.”

With respect to the audit of accounts.

“A few entities are lagging behind in audit and most of them are trying to complete these outstanding audits,” Mr Singh said. 

“Some of these agencies are relatively small that have not been able to previously comply with the requirements so they are now redoing the accounts under those standards.

“We are constantly following up on these outstanding reports which most of these entities are expecting to clear in the coming year.

“Overall there has been an improvement in the compliance rate.”

Question by Opposition Member of Parliament Aseri Radrodro

Why does it take that long to review the act and still hasn’t been finalised since 2014?

Response:

Mr Singh said the delay was because they were finding it difficult to find partners to work with.

“There are 25 state owned enterprises and right now I understand the ministry is monitoring 21. The revised act will cover the additional enterprises.”

Question by Opposition Member of Parliament Ratu Naiqama Lalabalavu

Would you be able to guide the committee on the review of this act whether the core functions of the act still remains or there will be changes? 

Response:

The core objective currently in the Public Enterprise Act 1996 will continue.

But in terms of strengthening the act, we will align it to best practices and also, new company act is there so some of the provisions in the act will be updated in terms of divestment.

The act is still under consideration and once the discussions are finalised it will be presented in the cabinet. 

Feedback:  selita.bolanavanua@fijisun.com.fj



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