CIPE’s most recent Economic Reform Feature Service article discusses the publicly owned enterprise (POE) sector in Kosovo and the need for reform. The article is based on a longer report by CIPE partner the Riinvest Institute for Development Research, which has been trying to improve governance standards in Kosovo’s POEs. Riinvest found that there are a number of institutional obstacles POEs face when implementing corporate governance best practices, ranging from a lack of awareness about the importance of corporate governance to the lack of a clear commitment on the part of the Government to POE restructuring and privatization. The set of policy recommendations Riinvest developed, should they be adopted, would go a long way towards strengthening the economy of Kosovo and stimulating further reform.
It is important to note that good corporate governance in these publicly owned enterprises is not just beneficial for the companies themselves – instituting the principles of transparency and accountability in POEs leads to improved public governance on a larger scale. Adopting a code of corporate governance based on the OECD Guidelines on Corporate Governance of State-owned Enterprises, will ensure that the public funds used to support these companies are spent responsibly. And, in the long term, better governance will reduce instances of corruption and improve the companies’ competitiveness and productivity, leading to a better services for consumers and a stronger economy.
Please read the article and come back to post any comments you have. I would be interested to hear about programs to implement codes of corporate governance in state-owned companies in other countries.
Abstract: Kosovo is one of the former Yugoslavia’s last regions to begin transitioning to a free-market democracy. A key barrier to reform is a weak and ineffective governance system, manifested in an inefficient public sector that is burdened by a lack of transparency, accountability, and clearly defined roles for stakeholders. The absence of a governing principle for publicly owned enterprises (POEs) has contributed greatly to this confusion.
As such, the adoption of a modern corporate governance framework, in compliance with the Organisation of Economic Co-operation and Development (OECD) Principles of Corporate Governance and the OECD Guidelines on Corporate Governance of State-owned Enterprises, should be high on the agenda for reformers in the region. It is one of the key steps that Kosovo must take to strengthen its economy, attract investment, and stimulate further reform.
Published Date: January 31, 2007